The Future of Chinese Travel - The Global Chinese Travel Market - A report by Oxford Economics for InterContinental Hotels Group (IHG)

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The Future of
Chinese Travel
The Global Chinese Travel Market

A report by Oxford Economics for
InterContinental® Hotels Group (IHG®)
1

Contents
Executive Summary                             2

Introduction                                  6

1    Background                               8

2    Global destinations for Chinese travel   16

3    Chinese Traveller Spending               28

4    Additional Opportunities                 38

5    Conclusion And Recommendations           46

Annex: Global City Travel Data Tables         50
– breakdown by country

Annex: City Calculation Methodology           66
2                                                                                                                                                                                                                                                                               3

                                                                                                                                                               • Robust income growth and expansion of China’s         • Leisure tourism comprises an increasing share
                                                                                                                                                                 middle class will make long-haul travel more            of Chinese travel demand. Currently, leisure
                                                                                                                                                                 achievable for Chinese households. The number           accounts for 59% of total Chinese travel and
                                                                                                                                                                 of Chinese households earning above $35,000 per         tourism spending. By 2023, the leisure share of
                                                                                                                                                                 annum – a key income level at which international       total Chinese outbound tourism will reach 62%.
                                                                                                                                                                 travel becomes more affordable – rose by 21             With the growing popularity of leisure travel to the
                                                                                                                                                                 million from 2003 to 2013. An additional 61 million     US and Europe, these long-haul destinations will

Executive Summary
                                                                                                                                                                 households will pass this threshold by 2023.            experience greater travel flows from China.
                                                                                                                                                               • Already, Chinese travellers are ranked among          • Cities are the primary destinations of Chinese
                                                                                                                                                                 the top spenders on a per-trip and per-night            travellers, with over 85% of Chinese outbound
                                                                                                                                                                 basis. Redistribution of Chinese households             travel to major cities around the world. Excluding
                                                                                                                                                                 toward the middle and upper income classes              SAR destinations, 70% of outbound travel from
                                                                                                                                                                 will raise the value of Chinese travellers to           China is to major cities. As income growth drives
                                                                                                                                                                 international destinations as preferences continue      up tourism demand, this preference will fuel robust
                                                                                                                                                                 their shift toward long-haul travel, higher-cost        growth in Chinese travel to major city destinations,
                                                                                                                                                                 accommodations and upscale shopping.                    relative to non-urban destinations.

• China is becoming the largest source market                                                        • Historically, low average household incomes,
  for international travel. Already the global leader                                                  a large lower income class, and travel restrictions
  in tourism departures, it is estimated that                                                          – both inbound and outbound – have tempered
  China overtook the US as the largest source                                                          Chinese demand for long-haul travel, weighting
  of international travel spending in 20141. In total,                                                 Chinese travel toward short-haul destinations.
  Chinese travellers made over 67.5 million trips                                                      The Special Administrative Regions (SARs) of Hong
  in 2014. Annual Chinese arrivals are expected                                                        Kong and Macao received a combined 28.4 million
  to total nearly 97 million by 2023 at an average                                                     tourist arrivals from China in 2014 – representing
  annual growth rate of 5.1% over the ten-year                                                         42% of total Chinese outbound travel. Given the
  forecast horizon.                                                                                    ease of travel to the SARs, and their high popularity
                                                                                                       among Chinese travellers, these destinations will
                                                                                                                                                               Chinese demand for long-haul travel will ramp up
                                                                                                       maintain their market share over the next ten years     Total Chinese outbound travel spending by destination, billion US$
                                                                                                       even as Chinese visits to other short- and long-haul
                                                                                                       markets become more frequent.
Chinese household income                                                                                                                                         Southeast Asia
                                                                                                                                                                                                                                                                          2023
distribution                                                                                                                                                    Hong Kong, SAR                                                                                            2013
Millions of households by earnings per annum                                                                                                                        Macao, SAR

                                                                                                                                                                 North America
    400   364                                                                  up to $20,000
                                                                               $20,000 to $35,000                                                               Northeast Asia
                                                                                                                                                                     (ex SARs)
    350                                                312                     $35,000 to $70,000
                                                                               $70,000 to $150,000                                                              Western Europe

    300                                                                        over $150,000
                                                                                                                                                               Emerging Europe

    250
                                                                                                                                                                         Africa

    200
                                                                                                            Annual arrivals                                            Oceania

    150
                                                                 93                                           from China                                         South America

                                                                           63
                                                                                                            will total nearly
    100                                                                                                                                                              South Asia
                44
     50                21                                                                                                                                           Middle East

      0
                                  5        1
                                                                                     21
                                                                                               4           97 million globally                                       Caribbean

                     2013                                              2023
                     Source: National Statistical Offices, Tourism Economics
                                                                                                                by 2023                                         Central America

                                                                                                                                                                                  0        10               20             30               40               50

1
 Chinese outbound spending is already larger than that for the US according to
some sources and notably balance of payments data. However, once education
related spending is removed from the total it is still lower than the US for 2013.
4                                                                                                                                                                                                                                                                                                                                         5

• Whereas the volume of arrivals from China to            European cities, London enjoys the highest average    Growth premium from travel facilitation
  global destinations varies considerably, average        trip length for Chinese travellers, topping several
                                                                                                                Chinese Traveller Spending, billion US$ 2017
  length of stay is a more meaningful measure for         other leading long-haul destinations.
  comparing the value of Chinese tourists across
                                                       • Nearly 92.5% of total Chinese outbound travel                                              es
  global cities. Sydney and Melbourne enjoy the                                                                                                 St
                                                                                                                                                  at
                                                         spending is received by major global cities – 44%                                  d
  highest trip lengths among long-haul markets                                                                                      Un
                                                                                                                                        ite
                                                         excluding Hong Kong and Macao. The largest city          20
  in the Asia-Pacific region. While New York City,
                                                         markets for Chinese travel spending are mostly
  Los Angeles, and Tokyo represent the top three
                                                         found in the Asia-Pacific and the US. However,
  destinations for Chinese travellers in terms of                                                                                                                                                                                                                                                            Baseline
                                                         spending growth over the next decade will see
  visits, they enjoy a somewhat lower length of stay
                                                         more long-haul cities rise to the top.                                                                                                                                                                                                              Incremental gain
  than Bangkok and Pattaya in Thailand. Among                                                                     15                                 aila
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                                                                                                                                                                                                             Source: Tourism Economics
                                                                                                                                                                                         Note: Hong Kong and Macao growth premiums excluded to improve scale
Absolute growth in thousands, 2013 - 2023              Absolute growth in thousands, 2013 - 2023

                                                                                                                • Destinations with easier access, including
800
                                                       2,500                                                      simpler visa policies, are set to gain the most.
                                                                                                                  Additional measures to improve visitor visa access
                                                                                                                  present even greater opportunities for tourism                                                                                Improving access to
600
                                                       2,000                                                      growth to these destination countries. Analysis
                                                                                                                  of historical travel facilitation reforms affecting                                                                          travel for the Chinese
                                                                                                                  Chinese nationals shows that these reforms yielded
                                                                                                                  an average growth premium of 19.9 percentage                                                                                  yields a nearly 20%
                                                       1,500                                                      points in Chinese arrivals above historical trend.
                                                                                                                  This implies that destinations which adopt                                                                                     growth premium
                                                                                                                  facilitative policies could see a substantial growth
                                                                                                                                                                                                                                                     in arrivals
400

                                                                                                                  premium in Chinese arrivals over a three-year
                                                       1,000
                                                                                                                  forecast horizon. Examples of these reforms
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                                                                                                                  visa waivers to Chinese nationals, as well as
200
                                                                                                                  the addition of destination countries to China’s
                                                        500
                                                                                                                  Approved Destination Status (ADS) scheme.

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                 Source:   Tourism
                  Source: Tourism    Economics
                                  Economics                             Source:
                                                                          Source:Tourism    Economics
                                                                                  Tourism Economics
6                                                                                                                   7

Introduction

This report examines trends in Chinese outbound          and high-end shopping are also explored as drivers of
travel in the context of economic and demographic        the increasing value of Chinese travellers to these city
developments and projects how Chinese travel demand      destinations over the forecast horizon.
will evolve over the coming decade. The research
provides a unique perspective of which destinations -    As countries globally look for new sources of income
both cities and countries - are set to benefit most      and job creation, the potential benefits from improved
from this growth in Chinese travel demand. Modelling     travel policies in terms of boosting visitor numbers
has linked expected growth in income and spending        are also explored, offering recommendations and
to total tourism demand. The potential benefit for       best practices for global destinations. Historical case
different worldwide destinations has also been           studies of travel-related reforms affecting Chinese
identified in comparison to overall growth in Chinese    travel provide the basis for an alternative scenario
outbound travel.                                         which addresses the potential impacts on Chinese
                                                         tourist arrivals and travel spending within destination
In particular, global city destinations are identified   markets pursuing such reforms.
as key growth markets for Chinese outbound tourism.
Given that cities are the primary loci of growth in
China’s mid- to upper-class households, global city
destinations are expected to receive a greater share
of additional Chinese outbound tourism relative to
non-urban destinations. The increasing preference for
long-haul leisure travel, higher-cost accommodations,
8                                                                                9

1. Background

1.1 Favourable economic
and demographic trends
China has experienced phenomenal economic                China has experienced
growth over the past decade with GDP per capita
outperforming other large emerging markets. Growth       phenomenal economic
has exceeded that of the other BRIC economies which
represent the largest emerging markets experiencing
rapid growth.
                                                            growth over the
The size of the Chinese middle class has expanded
                                                              past decade
massively as average income has risen. GDP per
capita has increased in real terms to close the gap on
developed countries with growth of 148% over the
past ten years. Between 2003 and 2013, GDP per capita
grew at an average annual rate of 5.5% in the BRIC
economies, dwarfing rates of 0.7% and 0.9% across
the Eurozone and in the US, respectively. Growth in
Chinese GDP per capita led that of both key emerging
markets and developed economies over this period,
and average incomes are expected to rise further as
the economy continues to develop.
10                                                                                                                                                                                                                                                                                                                                                                                                    11

Real GDP per capita                                                                            Real GDP per capita                                                                    Middle class households
% growth per annum                                                                             % growth per annum                                                                     Million households with income over $35k; able to

14                                                                            Eurozone         14
                                                                                                                                                                      Brazil
                                                                                                                                                                      India
                                                                                                                                                                                      afford long-haul travel
                                                                                                                                                                                      90
                                                                                                                                                                                                                                                                                                                               Shanghai will surpass
                                                                                                                                                                                                                                                                                                                                Boston, Philadelphia
                                                                              United States                                                                           Russia                                                           Brazil
                                                                              China                                                                                   China                                                            India
12                                                                                             12                                                                                     80                                               Russia
                                                                                                                                                                                                                                       China

                                                                                                                                                                                                                                                                                                                               and San Francisco in
10                                                                                             10
                                                                                                                                                                                      70

8                                                                                              8
                                                                                                                                                                                      60

                                                                                                                                                                                                                                                                                                                                    GDP by 2016
6                                                                                              6

                                                                                                                                                                                      50
4                                                                                              4

2                                                                                              2                                                                                      40

 0                                                                                              0
                                                                                                                                                                                      30
-2                                                                                             -2
                                                                                                                                                                                      20
-4                                                                                             -4

-6                                                                                             -6                                                                                     10

     2003    2004    2005    2006    2007    2008    2009    2010    2011    2012       2013   -8                                                                                      0

                                                                                                    2003   2004   2005   2006   2007    2008   2009    2010   2011   2012      2013                  2003                                       2013                               2023

     Source: Census Bureau, Eurostat, National Statistical Offices, Tourism Economics                             Source: United Nations, Tourism Economics                                                       Source: Oxford Economics

                                                                                                                                                                                      Chinese Cities: Select indicators
                                                                                                                                                                                      Bubble size represents relative GDP per capita

The proportion of households able to afford leisure                                            majority of China’s middle- to upper-income classes –                                                                                                                                                                                                       i
                                                                                                                                                                                                                                                                                                                                                        ha
travel, and international travel in particular, has                                            encompassing households which are most likely                                               GDP
                                                                                                                                                                                                                                                                                                                                                    a ng
                                                                                                                                                                                                                                                                                                                                                 Sh
risen globally over the past decade, but especially in                                         to engage in long-haul travel. Thus, rapid expansion                                   350
China. Previous analysis of income and travel spending                                         of Chinese cities illustrates the substantial economic
patterns by the World Travel & Tourism Council (WTTC)                                          growth driving Chinese tourism demand. Looking                                                                                                                                                                                            ijin
                                                                                                                                                                                                                                                                                                                                             g
                                                                                                                                                                                                                                                                                                                                       Be
and Oxford Economics for InterContinental® Hotels                                              ahead, Chinese cities will become more important,                                      300
                                                                                                                                                                                                                                                                    Gu
Group (IHG®)2 identified household income of close                                             rising in GDP rankings and overtaking some developed                                                                                                                    an
                                                                                                                                                                                                                                                                         gz
to $20,000 as the threshold at which Chinese                                                   European and North American cities in terms of                                                                                                                               ho
                                                                                                                                                                                                                                                                              u,
                                                                                                                                                                                                                                                                                 Gu
                                                                                                                                                                                                                                                                                    an                                   jin
households can afford leisure travel. From there,                                              size, supporting expectations for greater Chinese                                      250                          Su
                                                                                                                                                                                                                       zh                                    Sh
                                                                                                                                                                                                                                                                                       gd
                                                                                                                                                                                                                                                                                           on                       Ti
                                                                                                                                                                                                                                                                                                                      an
                                                                                                                                                                                                                         ou
it was determined that households making $35,000                                               international tourism.                                                                                                           ,J
                                                                                                                                                                                                                                  ia
                                                                                                                                                                                                                                                               en
                                                                                                                                                                                                                                                                  zh
                                                                                                                                                                                                                                                                    en
                                                                                                                                                                                                                                                                                              g
                                                                                                                                                                                                                                      ng
per annum find international travel more affordable,                                                                                                                                                                                       su
                                                                                                                                                                                                                                                                                                                                                                                                in
                                                                                                                                                                                                                                                                                                                                                                                                  g

taking more long-haul trips.                                                                   Currently, there are over 150 Chinese cities with a                                                                                                                                                                                                                                       ho
                                                                                                                                                                                                                                                                                                                                                                                            ngq
                                                                                                                                                                                      200                                                                                                                                                                                           C
                                                                                               population over one million that can be considered                                                                                                                                                              an
                                                                                                                                                                                                                                                                                                            hu
The number of Chinese households earning above                                                 significant origin markets for tourism, given                                                                                                                                                           Si
                                                                                                                                                                                                                                                                                                         c
                                                                                                                                                                                                                                                                                               d  u,
$35,000 rose to an estimated 27 million in 2013                                                their rapid GDP and income growth over the past                                                                                             n gs
                                                                                                                                                                                                                                                u
                                                                                                                                                                                                                                                                                          e ng
                                                                                                                                                                                      150                                               ia                                            Ch
from 6 million just ten years ago. The 21 million new                                          decade. Several Chinese cities are set to overtake                                                                            ux
                                                                                                                                                                                                                                     i,J
                                                                                                                                                                                                                            W
Chinese households now able to afford travel dwarfs                                            some notable Western cities in terms of GDP size
the household wealth accumulation in other emerging                                            in the coming years. Shanghai will surpass Boston,
                                                                                                                                                                                      100
markets. In 2003 there were an estimated 11 million                                            Philadelphia, and San Francisco by 2016, and Beijing                                              Xiamen,
                                                                                                                                                                                                            Kunming,
                                                                                                                                                                                                            Yunnan
households in Brazil, Russia and India with income                                             is expected to do the same by 2021. These and other                                               Fujian

above the $35,000 level. By 2013, this value had grown                                         rising Chinese cities are likely to become the most
                                                                                                                                                                                      50
to 23 million; fewer households than in China alone.                                           important source markets for international tourism
                                                                                               demand, especially as China’s increasingly urban
Chinese cities are also rising in prominence as hubs                                           population prefers travel to city destinations.                                                                                                         Xianyang, Shaanxi
of economic activity. Urban centres are host to the                                                                                                                                        0

                                                                                                                                                                                                                            5                                     10                                                15            20             25                              30
                                                                                                                                                                                                                                                                                                                                                               Population million
                                                                                                                                                                                                                                                                                                                                                                    Population million
2
 World Travel & Tourism Council and Oxford Economics (2014), The Economic
Impact of Travel & Tourism 2014 (Online), available:
http://www.wttc.org/focus/research-for-action/economic-impact-analysis/
12                                                                                                                                                                                                                                                                                                  13

Chinese household income distribution                                    Chinese household income distribution                                  China travel and tourism spending by purpose of trip
Share of Chinese households by income class                              Share of Chinese households by income class                            Billion US$
                                                                                                                                                                                                                                                                                               %
2013                          $70k to $150k                              2023                         $70k to $150k                                            300                                                                                                                             80
                                  1.1%                    Over $150k                                      4.3%
                 $35k to $70k
                                                             0.2%                                                                  Over $150k                                                                                         Forecast
                    4.9%                                                                                                              0.8%
                                                                                                                                                                                                                                                                                               70
                                                                                                                                                               250

                                                                                                                                                                                                                                                                                               60
                       $20k to $35k                                                                                                                            200
                          10.1%                                                                   $35k to $70k
                                                                                                     12.8%                                                                                                                                                                                     50

                                                                                                                                                               150                                                                                                                             40
                                                                                                                                                                                   Business share of
                                                                                                                                                                                   total T&T spending (R)
                                                                                              $20k to $35k                                                                         Business (L)
                                                                                                                                                                                   Leisure (L)                                                                                                 30
                                                                                                 18.8%
                                                                                                                                                               100

                                             Up to $20k                                                                 Up to $20k                                                                                                                                                             20
                                               83.7%                                                                      63.4%
                                                                                                                                                               50
                                                                                                                                                                                                                                                                                               10

                                                                                                                                                                0                                                                                                                              0
                                                                                                                                                                      2003 2004 2005   2006 2007 2008       2009 2010 2011 2012 2013 2014 2015 2016       2017 2018 2019 2020 2021 2022 2023

Source: National Statistical Offices, Tourism Economics                  Source: National Statistical Offices, Tourism Economics                                                             Source: IMF, UNWTO/ Ministry of Tourism, Tourism Economics

1.2 Demand for international travel                                      Chinese – even those at lower income levels – spend                                                                                                       Leisure travel has begun to represent a greater
                                                                         around 53% of their disposable income on travel –                               Top long-haul country arrivals, 2013-2023                                 share of total Chinese travel demand. Historically,
will grow further                                                        excluding spending on necessities.                                                                                                                        outbound travel demand has been dominated by
Chinese incomes are set to grow further over the                                                                                                                                                                                   business travel; less than ten years ago business
                                                                         The number of low-income households with high                                                                              Absolute growth                travel spending comprised over three-quarters of total
coming decade and beyond, catching up further                            propensity for booking short-haul trips and low-cost
with developed countries in terms of average income.                                                                                              Rank                 Market                         (‘000 arrivals)              Chinese international travel spending. Business travel
                                                                         accommodations – those earning between $20,000                                                                                                            now accounts for less than half of Chinese demand
Oxford Economics predicts that 61 million more                           to $35,000 per annum – will more than double by 2023                       1                United States                           3,431
households will be able to afford international travel                                                                                                                                                                             and could fall further as household income and leisure
                                                                         to 92.6 million. The number of Chinese households                          2                   France                               1,221
                                                                                                                                                                                                                                   demand continue to mature. By 2023, leisure trips
by 2023, cementing China’s place as the top origin                       earning between $35,000 and $70,000 – the income                           3                  Germany                                909                  are expected to account for 62% of total Chinese
market. China is currently on par with the US as                         bracket where demand gravitates toward long-haul
a source market and is set to become the largest                                                                                                    4                   Russia                                541                  outbound travel.
                                                                         trips and higher-cost accommodations – will nearly
long-haul source market, surpassing the UK, US,                          triple to 63 million. Most promising is the expected
                                                                                                                                                    5                Switzerland                              474
                                                                                                                                                                                                                                   Long-haul leisure travel destinations are set to benefit
and Germany, by 2020.                                                    quadrupling in the number of Chinese households                            6                   Austria                               377                  the most from evolving demand. There is potential
The countries with the greatest opportunities for                        making $70,000 to $150,000 by 2023 to 21.3 million.                        7                    Italy                                359                  for even stronger growth in some destinations
growth in coming years are those that currently                          Travellers in the highest income bracket are most                          8                  Belgium                                343                  as further moves can be made to ease access or to
represent smaller shares of outbound Chinese travel.                     likely to opt for luxury accommodations and tend to                        9                Netherlands                              322
                                                                                                                                                                                                                                   attract Chinese tourists. The top long-haul destination
The United States stands out as a destination which                      spend more while on long-haul trips.                                                                                                                      countries for Chinese travellers – namely the United
                                                                                                                                                    10           United Kingdom                               299
receives a relatively low share of Chinese travel –                                                                                                                                                                                States, France, and Germany – will likely remain the
                                                                         As Chinese tourism demand matures we expect                                                                                                               most popular, but outbound volumes and spending
about 3% in 2013 – but will experience strong growth,                    preferences to shift toward more expensive, longer-
as a result of increasing efforts to boost inbound                                                                                                                                                                                 from China to these and other long-haul destinations
                                                                         haul experiences. Tourism demand by origin market                                                                                                         are set for considerable growth.
travel via improvements to visitor visas and marketing                   tends to evolve from domestic to short-haul to
efforts. Similarly, the United Kingdom will see Chinese                  long-haul travel as growth in the proportion of middle
arrivals more than double over the next decade – due,                    class households causes average incomes to rise.
in part, to ongoing visa improvements.                                   Rapid growth in the number of middle to upper
Expected changes in China’s income distribution                          class households in China will fuel the transition
suggest that Chinese travellers will become more                         toward long-haul travel and raise the average value
valuable to foreign destination markets in the next                      of Chinese travellers to destinations markets.
eight years. According to the World Travel Organization
(UNWTO) and European Travel Commission (ETC)5,

5
 European Travel Commission and World Tourism Organization (2013), The
Chinese Outbound Travel Market– 2012 Update, UNWTO, Madrid.
14                                                                                                                                                                                                                        15

Chinese guests in foreign and domestic hotels
Thousands
                                                                                                                         %    1.3 Domestic vs outbound
                                                                                                                              tourism demand
                                                                                                                                                                                                       Domestic demand
     1600
                                                                                       Forecast
                                                                                                                         95

                                                                                                                              Chinese tourism has largely remained within domestic
                                                                                                                                                                                                            for visitor
     1400
                        Domestic hotel guests
                                                                                                                         94
                                                                                                                              borders to date, although outbound travel has grown
                                                                                                                              strongly. Today, over 90% of Chinese travellers stay
                                                                                                                                                                                                        accommodation
                                                                                                                                                                                                          within China
                        share of total resident travel* (R)                                                              93
                        Outbound travel (L)                                                                                   at domestic hotels. Fewer than 15% of all trips made
     1200               Domestic guests (L)                                                                                   by Chinese citizens are outbound, albeit a higher
                                                                                                                         92

     1000
                                                                                                                         91
                                                                                                                              proportion than in previous years.

                                                                                                                              Domestic tourism demand within China is five times
                                                                                                                                                                                                         hit 1.6bn room
      800                                                                                                                90
                                                                                                                              larger than it was ten years ago. In the latest estimates
                                                                                                                              by Tourism Economics, there were almost one billion
                                                                                                                                                                                                         nights in 2013
                                                                                                                              visitor arrivals at accommodation establishments
                                                                                                                         89   in 2013, generating 1.6 billion room nights. This is
      600
                                                                                                                              equivalent to around 1.2 room nights per capita,
                                                                                                                         88   up from a ratio of 0.3 ten years ago. By comparison,
      400                                                                                                                     US domestic room demand per capita is around
                                                                                                                         87
                                                                                                                              4.3 room nights.
      200
                                                                                                                         86   Domestic tourism demand will continue
                                                                                                                              to grow despite some loss of market share to
       0                                                                                                                 85   international destinations.
              2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

                                            Source: IMF, UNWTO/ Ministry of Tourism, Tourism Economics                        Domestic Chinese travel demand is highly concentrated
                                            * Resident travel = domestic hotel guests+ outbound travel                        within cities. We calculate that in 2013 around two-
                                                                                                                              thirds of Chinese domestic travel was concentrated
                                                                                                                              within the largest 30 cities in China, in terms of
China travel spending by destination                                                                                          population. This proportion has remained relatively
Billion US$                                                                                                                   stable over the last ten years.
                                                                                                                         %
     1800                                                                                                                16   20 percent of domestic travel is currently located in the
                                                                                                                              Tier 1 Chinese cities of Shanghai, Beijing, Guangzhou
                                                                                                                              and Shenzhen6. As business and administrative
     1600                                                                             Forecast                           14   centres, these major cities are unsurprisingly
                                                                                                                              significant destinations for both leisure and business
     1400                                                                                                                     tourism. They are also key gateways for foreign
                       Outbound share of total                                                                           12
                       travel spending (R)                                                                                    tourism. Increased length of stay for major cities has
                       Outbound (L)
     1200              Domestic (L)                                                                                           been especially evident in Tier 1 cities as tourism has
                                                                                                                         10   evolved to include leisure visits.
     1000
                                                                                                                              The strongest domestic tourism growth over the
                                                                                                                         8    past ten years has been within Tier 2 cities7, helped
      800                                                                                                                     by large scale supply-side developments – including
                                                                                                                         6    improvements to tourism facilities, hotels,
      600                                                                                                                     and infrastructure.

                                                                                                                         4
      400

      200                                                                                                                2

        0                                                                                                                0
            2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
                                            Source: UNWTO/ Ministry of Tourism, Tourism Economics
                                            * Resident travel = domestic hotel guests+ outbound travel

                                                                                                                              6
                                                                                                                                Cities with 16 million households and $1 trillion in total household
                                                                                                                              income – according to Nielsen

                                                                                                                              7
                                                                                                                               Cities with 38 million households and $2 trillion in total household
                                                                                                                              income – according to Nielsen
16                                                                                                                                                                              17

2. Global destinations
for Chinese travel
2.1 Cities are key destinations                                                        of travel is well suited to overnight city visits allowing
                                                                                       major sights to be seen in close proximity to the hotel.
Over 85% of Chinese international travel is to major city
destinations, including travel to Hong Kong and Macao.                                 Among the top destination countries, major cities alone
Excluding these Greater China or SARs destinations,                                    receive almost half of each country’s total Chinese
the proportion falls to around 70%, but it is clear that                               visitors. For example, Bangkok accounts for over
cities represent a large proportion of Chinese travel                                  40% of Chinese room demand in Thailand while Seoul
demand.8 By comparison, total international travel to                                  generates just below 50% of room demand in Korea.
major cities from all origin markets represents around                                 At the extremes, London accounts for over 60% of
45.1% of all travel demand. Identifying where Chinese                                  all Chinese stays in the UK, and Auckland receives
travellers go to within destination countries is essential                             a similar proportion of total Chinese travel to New
to understanding this rapidly expanding origin market.                                 Zealand, while Sao Paolo attracts over 70% of Chinese
Chinese travel preference has been influenced in the                                   visitors to Brazil.9
past by a high proportion of business travel, skewing                                  The comparison of top global city destinations
volumes towards cities as business centres. However,                                   by arrival numbers provides some important insights
business travel currently accounts for less than half of                               about the behaviour of Chinese travellers. For instance,
all Chinese international travel demand. The proportion                                the fact that several Italian cities – namely Milan,
of total Chinese travel to cities remains high, indicating                             Florence, and Venice – appear on the top for arrivals
a preference for leisure travel to cities as well.                                     while other popular European cities – such as London
This fits with the key travel modes of Chinese tourists,                               and Paris – are absent does not necessarily
who tend to travel as part of a package trip involving                                 mean that these destinations are more popular
group tours with multiple destination stops. This type                                 among Chinese tourists.10

          Over 85% of Chinese
        international travel is to
         major city destinations

8
  Arrivals at all cities within a country can exceed the country total due to visits   10
                                                                                          The country-level arrivals data for Italy represent the sum of all arrivals at
to multiple cities within the same trip.                                               hotels at the city level – rather than arrivals at borders, as is the case with
                                                                                       most European countries. Since Chinese visitors tend to stay in more than
9
  Arrivals are measured within this study as travel involving at least one             five Italian cities per country visit, their length of stay in a given Italian city is
overnight in a hotel establishment or other paid accommodation. Visits to              far lower than that in London or Paris – where visitors spend the bulk of their
friends and relatives are not included in these trends.                                nights per country visit.
18                                                                                                                                                                                                                                                       19

In terms of number of nights spent by tourists, the mix            Top global city arrivals, 2013                                      Top city arrivals, Asia-Pacfic, 2013                 Seoul is the most visited global city destination
of top global city destinations is more diverse. Sydney                                                                                                                                     by Chinese travellers outside of the SARs, but it only
and Melbourne are added to the list, highlighting           Rank    Market                         Value (‘000 arrivals)       Rank         Market                  Value (‘000 arrivals)   enjoys the fifth largest number of overnight stays,
the tendency for Chinese visitors in Australia to stay      1       Seoul                          2,009                       1            Seoul                   2,009
                                                                                                                                                                                            with very low reported average length of stay by
longer than in most other Asia-Pacific locations,           2       Bangkok                        1,758                       2            Bangkok                 1,758                   Chinese visitors across Korea.
given the lower number of Chinese arrivals to these         3       Pattaya                        1,339                       3            Pattaya                 1,339
cities. Similarly, Dubai is among the top destinations      4       Taoyuan                        734                         4            Kuala Lumpur            579                     Seoul essentially acts as a hub to other destinations - it
                                                            5       Kuala Lumpur                   579                         5            Phuket                  544
in nights, despite the average number of Chinese            6       Taipei                         566                         6            Tokyo                   528
                                                                                                                                                                                            is a very popular city for connecting flights to, from and
arrivals to Middle Eastern cities falling behind that       7       Phuket                         544                         7            Busan                   472                     within the Asia-Pacific region. The fact that average
of destinations in the other regions.                       8       Tokyo                          528                         8            Jeju City               379                     length of stay is just one night is partially due to Seoul
                                                            9       Busan                          472                         9            Bali (Jimaran, Tuban)   348
                                                            10      New York City                  395                         10           Chiang Mai              251
                                                                                                                                                                                            Incheon International Airport offering travellers with
This raises an important distinction between the            11      Los Angeles                    392                         11           Banten                  230                     long-enough layovers between flights a complimentary
volume and value of Chinese outbound travel. While          12      Jeju City                      379                         12           Incheon                 217                     overnight stay and city tour. Chinese tour groups can
                                                            13      Bali (Jimaran, Tuban)          348                         13           Siem Reap               213
some cities receive a greater number of Chinese visits      14      Milan                          325                         14           Pahang                  196
                                                                                                                                                                                            incorporate this into their itineraries on trips to other
(volume), others experience a greater number of room        15      Firenze                        283                         15           Sydney                  195                     destinations within the region or indeed beyond.
nights spent by Chinese visitors (value). Average length
of stay represents the ratio of room nights spent per                                                                                                                                       Destinations within Thailand are the next most-
visit, providing a more meaningful comparison of the               Top global city nights, 2013                                         Top city nights, Asia-Pacfic, 2013                  visited global cities by Chinese travellers and enjoy
relative value of Chinese tourists across global cities.                                                                                                                                    a high average length of stay. The top three global
                                                            Rank    Market                         Value (‘000 nights)         Rank         Market                  Value (‘000 nights)     destinations measured in terms of hotel rooms sold
Discounting the Canadian provinces, which incorporate       1       Bangkok                        10,251                      1            Bangkok                 5,374                   to Chinese tourists are within Thailand. Bangkok is
several city destinations, Fukuoka in Japan boasts          2       Pattaya                        7,810                       2            Pattaya                 4,094                   a key gateway to the country and also to the region
                                                            3       Taipei                         6,385                       3            Phuket                  1,663
the greatest length of stay by Chinese visitors at          4       Taoyuan                        6,222                       4            Tokyo                   1,177
                                                                                                                                                                                            as a whole, with short-haul leisure travel representing
12.6 nights per trip in 2013. By this measure, Medina       5       Phuket                         3,173                       5            Seoul                   1,062                   the bulk of international trips by Chinese travellers.
and Mecca in Saudi Arabia are among the top city            6       Tokyo                          2,145                       6            Kuala Lumpur            841
destinations for Chinese tourists, highlighting the         7       Seoul                          2,075                       7            Chiang Mai              768                     Kuala Lumpur also receives a large number of visitors
                                                            9       Chiang Mai                     1,464                       8            Sydney                  663
significance of China’s expanding Islamic population.       10      New York City                  1,307                       9            Melbourne               534
                                                                                                                                                                                            as the fourth most visited city, similarly acting as a
London – the top Chinese destination in the UK and a        11      Los Angeles                    1,303                       10           Ayutthaya               512                     destination and business centre as well as a gateway
major transportation hub – is one of the top long-haul      12      Sydney                         1,240                       11           Osaka                   447                     to the rest of the country. Travel to Malaysia –
                                                            13      Melbourne                      998                         12           Fukuoka                 383
cities in terms of average stay at seven nights per trip.   14      Ayutthaya                      976                         13           Siem Reap               310
                                                                                                                                                                                            specifically to Kuala Lumpur – involves a higher
Melbourne and Sydney post the next longest average          15      Dubai                          895                         14           Hanoi                   289                     proportion of Chinese business travel than travel
stays at close to 6.5 nights. Other top long-haul city                                                                         15           Pahang                  285                     to Thai destinations.
destinations ranking high in average stay by Chinese                                                                                                                                        Tokyo is the top city destination within Japan,
tourists include Istanbul (3.7 nights), several US cities          Average length of stay, 2013                                          Average stay, Asia-Pacfic, 2013
                                                                                                                                                                                            accounting for nearly half of Chinese travel to the
(3.3 nights) – including New York City, Los Angeles,        Rank    Market                         Value (nights per trip)     Rank         Market                  Value (nights)          country. Tokyo is also the sixth most visited destination
San Francisco, and Washington, DC.                                                                                                                                                          worldwide and is favoured with a high length of stay
                                                            1       British Columbia               17.3                        1            Fukuoka                 12.6
                                                            2       Ontario, Alberta               15.6                        2            Melbourne               6.5                     by Chinese visitors. In terms of room nights, the city
                                                            3       Fukuoka                        12.6                        3            Sydney                  6.4                     overtakes Kuala Lumpur, despite receiving fewer
                                                            4       Quebec                         11.2                        4            Pattaya                 5.8
                                                            5       Medina                         7.7                         5            Ayutthaya               5.8                     Chinese travellers.
                                                            6       London                         7.0                         6            Phuket                  5.8
                                                            7       Melbourne                      6.5                         7            Bangkok                 5.8                     Travel to Indonesian cities is less favoured by the
                                                            8       Sydney                         6.4                         8            Chiang Mai              5.8                     Chinese than other regional centres, with a majority
                                                            9       Sharjah                        6.3                         9            Osaka                   5.0
                                                            10      Sao Paolo                      6.1                         10           Tokyo                   4.1
                                                                                                                                                                                            of travel to that country involving leisure trips to Bali.
                                                            11      Bangkok, Pattaya, Phuket,      5.8                         11           Hanoi                   2.9                     Nevertheless a relatively large proportion of travel to
                                                                    Chiang Mai, Ayuttha                                        12           Siem Reap               2.7                     Indonesia involves business travel with low average
                                                            12      Mecca                          5.7                         13           Kuala Lumpur            2.6
                                                            13      Osaka                          5.0                         14           Pahang                  2.6
                                                                                                                                                                                            length of stay.

     London– is one of the                                  14
                                                            15
                                                            16
                                                                    Jeddah
                                                                    Riyadh
                                                                    Tokyo
                                                                                                   5.0
                                                                                                   4.5
                                                                                                   4.1
                                                                                                                               15           Seoul                   1.0
                                                                                                                                                                                            Australian destinations see high length of stay and
                                                                                                                                                                                            a relatively low share of business travellers. Melbourne
      top long-haul cities                                  17
                                                            18
                                                                    Istanbul
                                                                    New York City, Boston,
                                                                                                   3.7
                                                                                                   3.3
                                                                                                                             2.2 City destinations by region                                and Sydney have become the primary long-haul
                                                                                                                                                                                            city destinations in the region as Chinese leisure
      in terms of average
                                                                    Los Angeles, Las Vegas,
                                                                    San Francisco, Chicago,                                  Asia-Pacific                                                   travel has grown.
                                                                    Washington DC, Philadelphia,

      stay at seven nights                                                                                                   In terms of arrivals, the top seven city destinations
                                                                    New Jersey, Seattle
                                                            19      Dubai                          3.3
                                                            20      Hanoi                          2.9
                                                                                                                             for Chinese travellers are all in the Asia-Pacific
                                                                                                                             region, even excluding Hong Kong and Macao.
            per trip                                                                                                         These cities comprise around one-third of total
                                                                                                                             Chinese outbound travel.
20                                                                                                                                                                             21

Europe                                                      In fact, London is estimated to be the largest European            Top city arrivals, Europe, 2013
                                                            market for Chinese room nights. This is due to a
Seemingly, the top three most visited cities in Europe      combination of a much longer average length of stay         Rank     Market                Value (‘000 arrivals)
by Chinese travellers are all within Italy, with Rome       and also fewer people per room. Ironically, it appears      1        Milan                 325
in 5th place. However, the counting of international        that a factor holding London and UK visitor volumes         2        Florence              283
arrivals at Italian hotels rather than borders – as with    back is actually increasing the value of each visit.        3        Venice                283
                                                                                                                        4        Paris                 226
other European countries – skews the ranking for            Sitting outside the Schengen visa zone, it is more          5        Lucern/Lake Lucern    219
the region. Italian cities are popular city destinations    difficult for Chinese travellers to visit the UK as part    6        Rome                  190
for the Chinese but show relatively low average trip        of a multi-destination trip to Europe so when they do       7        Bernese Oberland      164
                                                                                                                        8        Tyrol                 145
lengths compared to other European cities, as visits        visit, they tend to stay longer than in other European      9        Frankfurt             143
tend to incorporate multiple city destinations.             destinations. This could change as UK visa policies         10       Zürich Region         137
Further, Chinese travel is dispersed across a number        affecting Chinese travellers become more facilitative.      11       Vienna                115
                                                                                                                        12       Munich                100
of centres within the country rather than a single          UK travel also retains a higher concentration               13       Treviso               95
stand-out destination. Each of the top three cities         of business travel, partially explaining the lower          14       Berlin                84
receives between 15% and 17% of Chinese travel              guest-per-room ratio.                                       15       Padova                82
to Italy as a whole.
                                                            The nature of travel demand to London is also an
By contrast, France is the second most visited              explanatory factor as many visitors prefer to be based              Top city nights, Europe 2013
European country by Chinese travellers, but only Paris      within the city to take day trips to other destinations
ranks in the top 10 European cities. In fact, the second    within the UK. This is unlikely to change significantly     Rank     Market                Value (‘000 nights)

most visited European city by global travellers is Lyon,    while Chinese travellers continue to favour organised       1        Milan                 560
ranked as only the 38th largest city within Europe for      tours, as other UK cities cannot easily serve as stops      2        Florence              410
                                                                                                                        3        Venice                365
Chinese travel, as much of Chinese tourism in France        on the way to other country destinations. This differs to   4        London                343
is concentrated around the Paris region.                    other smaller cities in Europe.                             5        Paris                 328
                                                                                                                        6        Rome                  307
Travel to France from China is an unusual case,                                                                         7        Frankfurt             222
                                                                                                                        8        Munich                207
as visits and overnight stays are concentrated                                                                          9        Berlin                187
outside of major city areas. Overnight visits are                                                                       10       Lucern/Lake Lucern    148
heavily concentrated in the Ile de France region,                                                                       11       Bernese Oberland      117
                                                                                                                        12       Vienna                116
which includes Paris, but are most frequent in the                                                                      13       Zürich Region         112
departments adjoining the city rather than in                                                                           14       Istanbul              99
Paris itself. In 2013 there were two million Chinese                                                                    15       Tyrol                 91
arrivals in France of which 1.2 million stayed in paid
accommodation. Of these, around 900,000 stayed
within the wider Ile de France region, but fewer than                                                                           Average stay, Europe 2013
250,000 stayed within Paris itself. That is, Paris only
                                                                                                                        Rank     Market                Value (nights)
accounts for around a quarter of all Chinese overnight
stays to the wider region. For other international origin                                                               1        London                4.6
                                                                                                                        2        Berlin                2.2
markets, 60% of overnight travel to the Ile de France
                                                                                                                        3        Munich                2.1
region is centred in Paris itself.                                                                                      4        Istanbul              2.0
                                                                                                                        5        Milan                 1.7
Travel to the UK provides a clear contrast with a heavy                                                                 6        Rome                  1.6
concentration of Chinese visitors (over 60%) staying                                                                    7        Frankfurt             1.6
                                                                                                                        8        Paris                 1.5
within London. The UK capital appears to be used as                                                                     9        Florence              1.4
a base from which to explore the rest of the country,                                                                   10       Venice                1.3
with a large number of nights spent in the city. This                                                                   11       Vienna                1.0

concentration positions London as the 16th most
visited European city by Chinese travellers in 2013,
while the UK is only the 11th most visited country
                                                               London is estimated
in the region.                                                   to be the largest
Comparisons of Chinese travel to Paris and London
clearly show the distinction between traveller volume          European market for
and value. Paris receives three times more hotel guests
from China than London, yet it is estimated that London        Chinese room nights
sells more hotel room nights to Chinese tourists
than Paris.
22                                                                                                                                                                                                                                                                   23

            Top city arrivals, Americas, 2013                Americas                                                       Middle East                                                                           Top city arrivals, Middle East, 2013
     Rank      Market                Value (‘000 arrivals)   Travel to the US from China dwarves other destinations         Middle East city destinations receive far fewer Chinese                        Rank        Market                Value (‘000 arrivals)

     1         New York City         395
                                                             within the American continent – the top 12 city                travellers on average relative to locations in other                           1           Dubai                 276
     2         Los Angeles           392                     destinations for travel in terms of arrival numbers            regions of the world. The tendency for longer-than-                            2           Abu Dhabi             44
     3         San Francisco         253                     within the region are in the US. Yet, the average length       average lengths of stay raises the value                                       3           Doha                  15
     4         Washington, DC        202                                                                                                                                                                   4           Riyadh                7
     5         Las Vegas             195
                                                             of stay by Chinese hotel guests in US cities is notably        of Chinese visitors to the region however.                                     5           Mecca                 4
     6         Chicago               121                     shorter than the average stay for the country as a                                                                                            6           Jeddah                2
     7         Boston                117                     whole. This is largely due to the extensive US air travel      A rising Muslim population in China has contributed                            7           Medina                1
     8         Philadelphia          47
                                                             network and universal visa access throughout the               to an increase in family and religious related trips to                        8           Sharjah               0.04
     9         New Jersey            47
     10        Seattle               46                      country, which increase the ease of inter-city travel.         the region. According to Pew Research11, the Muslim
     11        San Diego             41                      This makes it more appealing for Chinese travellers to         population in China comprised 1.8% of the nation’s
     12        Buffalo               40                                                                                     total population in 2010, a 38.4% increase from two                                   Top city nights, Middle East, 2013
     13        British Columbia      37
                                                             visit multiple cities while in the US, especially as part of
     14        Orlando               37                      a tour group package. On average, Chinese travel to the        decades prior. The rapid expansion of China’s Muslim                           Rank        Market                Value (‘000 nights)
     15        Atlanta               35                      US tends to involve visits to two or more cities per trip.     population has resulted in inflated demand for travel
                                                                                                                            from China to centres of the Islamic faith.                                    1           Dubai                 895
                                                                                                                                                                                                           2           Abu Dhabi             83
                                                             The US also has a more diverse city offering than many                                                                                        3           Riyadh                32
            Top city nights, Americas, 2013                  other countries and lacks a single dominant city in            Medina and Mecca have largely benefited from this                              4           Doha                  27
                                                             terms of arrivals. Three cities stand out as receiving         trend. The travel, retail and entertainment centres                            5           Mecca                 23
     Rank      Market                Value(‘000 nights)                                                                     of Dubai and Abu Dhabi have led the region,                                    6           Medina                11
                                                             a notably larger than average proportion of Chinese                                                                                           7           Jeddah                8
     1         New York City         817                     travel however: New York City, Los Angeles and San             attracting an increasing number of Chinese tourists                            8           Sharjah               0.27
     2         Los Angeles           814
                                                             Francisco. Together these cities account for around            on leisure trips and cruises.
     3         San Francisco         525
     4         British Columbia      456                     half of the nights spent by Chinese travellers in the
                                                                                                                            Chinese visitors to the Middle East tend to stay longer
     5         Washington, DC        418                     US. All three cities are ranked among the top 15 global                                                                                               Average stay, Middle East, 2013
     6         Las Vegas             404                                                                                    than in the average long-haul destination for two main
                                                             markets in terms of Chinese arrivals and room nights
     7         Ontario               374                                                                                    reasons. First, religious visits tend to last longer than                      Rank        Market               Value (nights)
     8         Chicago               251                     and are expected to remain the most visited within the
                                                                                                                            other leisure trips. For instance, a trip to the Islamic
     9         Sao Paulo             246                     wider region over the next ten years.                                                                                                         1           Medina                7.7
     10        Boston                243                                                                                    centres of the Middle East might incorporate sight-                            2           Sharjah               6.3
     11        Quebec                179
                                                             Some cities in Canada, and to a lesser extent, Brazil,         seeing and participation in religious observations or                          3           Mecca                 5.7
     12        Alberta               110
     13        Philadelphia          98                      see a relatively higher benefit measured in terms of           events which can last for several days, as opposed to                          4           Jeddah                5.0
                                                                                                                                                                                                           5           Riyadh                4.5
     14        New Jersey            98                      overnight stays and rooms sold. These cities all enjoy         sporting or entertainment events which might take                              6           Dubai                 3.2
     15        Seattle               97
                                                             a higher average length of stay than US cities. Sao            place on a single day. Second, cruises in the Middle                           7           Abu Dhabi             1.9

                                                             Paulo – the largest city in the Americas – is favoured         East – popular among Chinese leisure visitors – often                          8           Doha                  1.8

                                                             by a relatively high length of stay, given the presence        involve one major coastal city as a base for overnight
              Average length of stay, 2013                                                                                  lodging and departures for day excursions to other
                                                             of the most heavily-used airport in Latin America with
     Rank      Market                Value (nights)          regional service to key destinations in Brazil and much        destinations in the region.
     1         British Columbia      17.3                    of South America. Similarly, Chinese travel to Canada
     2         Alberta               15.6                    tends to revolve around urban centres (e.g. Vancouver
     3         Ontario               15.6                    in British Columbia and Toronto in Ontario) with day
     4         Quebec                11.2
     5         Sao Paulo             6.1                     trips throughout the rest of the province.
     6         New York City         3.3
     7         Los Angeles           3.3                     Outside of Brazil, travel from China to Latin America is
     8         San Francisco         3.3                     relatively low compared to the rest of the region, with
     9         Washington, DC        3.3
                                                             business taking up a greater proportion of trips than
     10
     11
     12
               Las Vegas
               Chicago
               Boston
                                     3.3
                                     3.3
                                     3.3
                                                             leisure. Mexico is the next largest country destination
                                                             for Chinese travellers, though Mexico City – the
                                                                                                                                    A rising Muslim
     13
     14
               Philadelphia
               New Jersey
                                     3.3
                                     3.3
                                                             country’s top city destination – received fewer than
                                                             10,000 Chinese visitors in 2013.
                                                                                                                                  population in China
                                                                                                                                   has contributed to
     15        Seattle               3.3

                                                                                                                                 an increase in family
                                                                                                                                 and religious related
                                                                                                                                   trips to the region

                                                                                                                            11
                                                                                                                              Pew Research Center’s Forum on Religion & Public Life (2011), The Future
                                                                                                                            of the Global Muslim Population (Online), available at: http://www.pewforum.
                                                                                                                            org/2011/01/27/future-of-the-global-muslim-population-regional-asia/#ftn1
24                                                                                                                                                                                                                                         25

          Top city arrivals, Asia-Pacfic, 2013-2023                 Top city nights, Asia-Pacfic, 2013-2023                  Top city arrivals, Americas, 2013-2023                        Top city nights, Americas, 2013-2023
     Rank Market                          Absolute growth     Rank Market                        Absolute growth       Rank Market                         Absolute growth          Rank Market                        Absolute growth
     		                                  (‘000 arrivals)      		                                (‘000 nights)          		                                 (‘000 arrivals)           		                                (‘000 nights)

     1           Tokyo                   701                  1            Bangkok              2,112                  1            New York City          772                      1            New York City         1,600
     2           Bangkok                 691                  2            Pattaya              1,609                  2            Los Angeles            752                      2            Los Angeles           1,566
     3           Pattaya                 527                  3            Tokyo                1,531                  3            San Francisco          471                      3            San Francisco         981
     4           Kuala Lumpur            410                  4            Sydney               683                    4            Washington, DC         382                      4            Washington, DC        798
     5           Seoul                   399                  5            Phuket               654                    5            Las Vegas              364                      5            Miami                 791
     6           Bali (Jimaran, Tuban)   335                  6            Osaka                582                    6            Boston                 244                      6            Yellowstone (NP)      756
     7           Banten                  221                  7            Kuala Lumpur         579                    7            Chicago                210                      7            Boston                508
     8           Osaka                   218                  8            Melbourne            516                    8            Seattle                96                       8            Chicago               437
     9           Phuket                  214                  9            Fukuoka              498                    9            New Jersey             92                       9            Sao Paulo             281
     10          Sydney                  191                  10           Chiang Mai           302                    10           Philadelphia           87                       10           British Columbia      250
     11          Melbourne               166                  11           Aichi (Nagoya)       275                    11           Buffalo                83                       11           Ontario               205
     12          Pahang                  146                  12           Seoul                208                    12           Sao Paulo              75                       12           Seattle               200
     13          Penang                  140                  13           Pahang               207                    13           San Diego              75                       13           New Jersey            191
     14          Chiang Mai              99                   14           Ayutthaya            201                    14           Orlando                71                       14           Philadelphia          180
     15          Hokkaido                96                   15           Penang               197                    15           Atlanta                68                       15           Buffalo               171

2.3 Growth opportunities for                                destinations which currently receive a smaller share     Americas                                                     Rio will see the greatest increase in Chinese room
                                                            of Chinese outbound arrivals will also experience                                                                     nights in the region outside of the US, as 250,000
global cities                                               considerable gains. Osaka in Japan and Banten,           Some of the largest growth opportunities are evident         new arrivals are expected by 2023 – nearly five times
Given observed travel preferences of Chinese tourists,      Indonesia, will each see close to 220,000 additional     for US cities, with the major gateway cities of New York     the 2013 value. Brazil’s hosting of the 2016 Summer
growth to key city destinations will come at a premium      Chinese visitors by 2023, and the number of new          City and Los Angeles expected to benefit most from           Olympics in Rio could further boost the number of
over growth to countryside, beach, mountain, and            Chinese visitors to Sydney will approach 200,000 over    their popularity among Chinese travellers. Both              arrivals as Chinese spectators are introduced to the
other non-urban destinations. The incremental growth        the same period.                                         cities will see nearly triple the number of Chinese          cultural offerings and tourism attractions of the city
in number of visitors or room nights sold is a more                                                                  visitors over the next eight years. San Francisco,           and surrounding area. Several Canadian destinations
                                                            Growth in Chinese room nights will be strongest in       Washington DC, and Las Vegas will also see robust            will see greater Chinese room demand as well with
instructive measure than percentage growth. A small         the Asian cities of Bangkok and Pattaya in Thailand,
percentage growth from a large base still implies                                                                    growth, given their diverse historical attractions and       Alberta and Quebec each expected to receive close to
                                                            cementing their status as the largest world markets      entertainment offerings. Outside of the US, Sao Paolo        200,000 additional Chinese room nights by 2023.
a large increase in relative volumes and value. Some        for Chinese room demand. Tokyo will also experience
very small city destinations will top the rankings of                                                                will receive more than double the 2013 number of
                                                            robust growth in Chinese room nights, pushing the        Chinese tourist arrivals by 2023 as travel to Brazil
growth in percentage terms, though their market             Japanese capital into third place in the Asia-Pacific
shares will remain very small relative to the current                                                                becomes increasingly popular.
                                                            region by 2023. Close proximity will continue to
top city destinations.                                      benefit these already-popular Asia-Pacific destination   While New York City will see the greatest incremental
                                                            markets. Sydney and Melbourne will also post robust      increase in Chinese room demand in the Americas,
Asia-Pacific                                                growth in room nights – more than doubling their 2013    several smaller US cities are set for significant gains as
                                                            values – maintaining their status as the top long-haul   well. Miami will experience considerable room demand
The larger destination cities in Asia will receive
                                                            markets within the region.                               growth by 2023, as affluent Chinese tourists are
a greater share of new Chinese visitors, relative
                                                                                                                     attracted to its high-end shopping and entertainment
to smaller cities. Yet, percentage growth rates appear
                                                                                                                     offerings. However, relatively low average trip length
to be low for these markets. In terms of volume, Tokyo
                                                                                                                     will prevent Miami from becoming a top city destination
and Bangkok will be the largest recipients of new
                                                                                                                     within the Americas. Yellowstone National Park will
Chinese visitors in the region over the next eight years
                                                                                                                     also benefit from a rising number of Chinese room
– each are expected to receive close to an additional
                                                                                                                     nights, given its popularity among group tours to the
700,000 arrivals from China by 2023. Other Asia-Pacific
                                                                                                                     American West.
26                                                                                                                                                                                                                                                         27

Europe                                                       London will lead the top European cities in room            Middle East
                                                             demand growth from China over the next eight years,
Large opportunities exist for long-haul European
markets as well. London will receive the eighth largest
                                                             given the longer average trip length associated with
                                                             the city’s status as a travel hub for Chinese visitors to
                                                                                                                         Opportunities for additional growth in Chinese travel
                                                                                                                         to the Middle East are present for both leisure and                                Travel from China
absolute increase in Chinese visitors by 2023, though
its percentage growth will be weaker than other top
                                                             the UK. The city operates as a base for night life and
                                                             hotel accommodation for tourists who spend their days
                                                                                                                         business purposes.

                                                                                                                         China’s Muslim population is expected to reach 2.1%
                                                                                                                                                                                                              to Mecca and
European cities. Still, London will account for almost
half of Chinese national room demand, and an even
higher proportion of visits. Visa improvements could
                                                             exploring other destinations within the UK.

                                                             In terms of room nights, key Italian city destinations
                                                                                                                         of its total population by 2030, representing a 28%
                                                                                                                         increase over 2010 levels12. This increase will drive
                                                                                                                                                                                                            Medina will rise by
also boost growth above expectation.                         will receive the next strongest growth by 2023. The
                                                             tendency of Chinese travellers to stay in multiple
                                                                                                                         demand for travel to the primary Islamic city centres in
                                                                                                                         the region.
                                                                                                                                                                                                              50% by 2023
The top four markets in terms of expected growth             cities while visiting Italy will keep their average trip
in Chinese visitors by 2023 are all located in Italy.        length under two nights however. In contrast, Paris         Over the next decade, growth in arrivals to and nights
However, the counting of arrivals at Italian hotels          will receive 280,000 additional Chinese room nights by      spent in Dubai and Abu Dhabi is expected to top that
overstates the absolute gains in these cities. In relative   2023 – just over half of the expected average across        of other major city destinations throughout the world,
terms, London will see larger gains, receiving close         Milan, Rome, Venice, and Florence – while maintaining       such as London and Paris in Europe and Sydney in
to double the 2013 number of Chinese arrivals by 2023,       an average trip length of 2.5 nights or more. Similarly,    the Asia Pacific region. Similarly, travel from China to
while Milan and Florence will see about the same             Istanbul will receive around 205,000 additional Chinese     Mecca and Medina is forecast to rise by 50% by 2023.
number of new Chinese arrivals over the next eight           room nights while enjoying an average trip length
years as their respective 2013 totals.                       of around 3.6 nights.

          Top city arrivals, Europe, 2013-2023                         Top city nights, Europe, 2013-2023                          Top city arrivals, Middle East, 2013-2023                                 Top city nights, Middle East, 2013-2023
     Rank Market                       Absolute growth         Rank Market                         Absolute growth            Rank Market                                    Absolute growth            Rank Market                      Absolute growth
     		                               (‘000 arrivals)          		                                 (‘000 nights)               		                                            (‘000 arrivals)             		                              (‘000 nights)

     1         Venice                 358                      1            London                 624                        1               Dubai                         270                         1          Dubai                 875
     2         Milan                  350                      2            Milan                  613                        2               Abu Dhabi                     133                         2          Abu Dhabi             236
     3         Rome                   346                      3            Rome                   546                        3               Doha                          41                          3          Doha                  73
     4         Florence               339                      4            Venice                 473                        4               Riyadh                        4                           4          Riyadh                17
     5         Paris                  210                      5            Florence               466                        5               Mecca                         2                           5          Mecca                 9
     6         Lucern/Lake Lucern     188                      6            Paris                  280                        6               Jeddah                        1                           6          Medina                6
     7         Frankfurt              143                      7            Istanbul               205                        7               Medina                        1                           7          Jeddah                5
     8         London                 130                      8            Munich                 200                        8               Sharjah                       0.06                        8          Sharjah               0.34
     9         Vienna                 119                      9            Frankfurt              199
     10        Istanbul               108                      10           Berlin                 169
     11        Tyrol                  107                      11           Lucern/Lake Lucern     119
     12        Munich                 104                      12           Vienna                 115
     13        Zürich Region          99                       13           Zürich Region          77
     14        Treviso                90                       14           Tyrol                  67
     15        Padova                 84                       15           Koln                   66

                                                                                                                         12
                                                                                                                           Pew Research Center’s Forum on Religion & Public Life (2011), The Future
                                                                                                                         of the Global Muslim Population (Online), available at: http://www.pewforum.
                                                                                                                         org/2011/01/27/future-of-the-global-muslim-population-regional-asia/#ftn1
28                                                                                29

3. Chinese
  Traveller Spending

3.1 Chinese traveller yield
While assuming the role of the largest outbound travel
market in the world in terms of volume, China has also
                                                             Between 2007 and
caught up with other major origin markets in terms
of per-trip spending. Avoiding much of the drag from
                                                             2013, Chinese per-
the global recession experienced in other outbound
markets, China exhibited rapid growth in both outbound
                                                           trip spending growth
visits and spending over the past few years.
                                                               averaged 15%
Between 2007 and 2013, Chinese per-trip spending
growth averaged 15% – compared to 7.5% over the
previous ten years. In 2013, travellers from China
spent just over $1,400 per visit on average falling just
behind those from the UAE, Iran, Saudi Arabia, Brazil,
Norway, and Australia – the top origin markets for
per-trip spending.
30                                                                                                                                                                                                                                                                                                               31

Though per-trip spending by Chinese travellers is                                     Outbound travel spending per trip                                                     average, $430 per night in 2013, with considerably                          The distribution of travel and tourism spending abroad
relatively high, low average income and preference                                                                                                                          more spent per night while visiting short-haul than                         is a key determinant of the value of the Chinese
for short-haul travel contribute to Chinese travellers’
                                                                                      by origin                                                                             long-haul destinations.                                                     traveller to a destination market. The shares of per-trip
tendency to spend less on a given trip than the top                                   US$, 2013                                                                                                                                                         spending by Chinese visitors attributable to airfare,
outbound markets. While earnings in China have grown                                                                                                                        3.1.1 Chinese market profile                                                accommodation, local travel, dining, entertainment
rapidly, average disposable income per household                                      United Arab Emirates
                                                                                                         Iran
                                                                                                                                                                                                                                                        and shopping tend to differ based on the purpose of the
remains relatively low, limiting the capacity of the                                          Saudi Arabia                                                                  Identifying the preferences and characteristics                             visit. For instance, holidays or leisure trips for purposes
                                                                                                      Brazil
average Chinese visitor to spend while abroad.                                                      Norway                                                                  of Chinese travellers is crucial in understanding their                     of sightseeing, entertainment, and shopping tend to
                                                                                                  Australia
                                                                                                      China                                                                 travel spending decisions.                                                  include costs for hotel accommodation and local travel
Frequent, short trips to the SARs, as well as other                                                  Taiwan
                                                                                              New Zealand                                                                                                                                               via paid rental services and public transportation
short-haul destinations in Asia Pacific, keep the                                                    Russia                                                                 The preference of Chinese leisure travellers for
                                                                                                Philippines                                                                                                                                             while visits to family and relatives (VFR) may include
average length of stay for Chinese travellers relatively                                         Singapore                                                                  packaged group trips is a key characteristic which
                                                                                              United States                                                                                                                                             nights spent at private residences and the use
low. Chinese visitors spent, on average, 1.1 nights per                                            Malaysia                                                                 shapes their travel and spending behaviour while
                                                                                               South Korea                                                                                                                                              of private vehicles.
trip in Macao and fewer than two nights per trip in                                                Belgium                                                                  abroad. Package trips are especially appealing to
                                                                                                    Canada
Hong Kong last year. In 2013, the average trip length of                                          Germany                                                                   new travellers, as they provide the comfort of a guide                      As previously suggested, the increasing popularity
                                                                                                   Vietnam
Chinese travellers to all country destinations was just                                               Japan                                                                 who speaks a familiar language and the company of                           and frequency of non-business travel is a key driver of
                                                                                                     France
3.3 nights (4.5 nights excluding SARs), while the world                                                 India                                                               fellow tourists. Further, package trips tend to include                     greater Chinese tourism spending. A 2013 joint study13
                                                                                                         Italy
average (excluding China) was 5.4 nights. By keeping                                       World (ex China)                                                                 reduced air fares, accommodation rates, and fees for                        by the ETC and World Tourism Organization (UNWTO)
                                                                                                   Portugal
trip length relatively low, Chinese travellers can afford                                              Spain                                                                entertainment offerings and attractions, offering                           showed that business travel – albeit shorter in average
                                                                                                     Austria
to spend more per night.                                                                   United Kingdom                                                                   a more economical alternative to individual travel.                         trip length – tends to bear higher per-trip spending,
                                                                                                  Indonesia
                                                                                               Netherlands                                                                  While the lower costs of organised group trips may                          on average, as they “are paid for by organisations and
As a result, whereas China ranks seventh highest                                           Hong Kong, SAR
                                                                                               South Africa                                                                 provide a smaller benefit per traveller to destination                      require a higher level of customisation”. However, the
in terms of per-trip spending among major long-                                                      Mexico
                                                                                                    Ukraine                                                                 markets, they have been a primary driver of new                             sheer increase in non-business travel volumes from
haul origin markets, it ranks fourth highest in                                                     Slovakia
                                                                                                                                                                            leisure tourism among China’s expanding middle-class.                       China and associated growth in leisure travel spending
per-night spending. Chinese travellers spent, on                                                                 0     1000     2000     3000      4000      5000   6000
                                                                                                                                                                                                                                                        are filling the gap left by a declining business travel
                                                                                                                                                                            As the Chinese travel market evolves, the popularity of
                                                                                                                                                                                                                                                        share of outbound trips.
                                                                                                                                                                            group leisure travel is unlikely to diminish, as a large
                                                                                                                     Source: UNWTO, Tourism Economics                       proportion of the increase in Chinese outbound arrivals                     A relatively high propensity for consumption and
                                                                                                                                                                            will be made by first-time travellers. However, Chinese                     accommodation spending while abroad raises the
                                                                                                                                                                            travellers making their second international trip and                       value of Chinese travellers above those from other
                                                                                                                                                                            those in higher income brackets are more likely to                          leading global source markets. According to sales data
                                                                                                                                                                            opt for individual travel, which carries higher per-                        by Ctrip – a travel services provider which aggregates
Average household personal disposable                                                 Average Chinese length of stay                                                        trip costs. Packaged group travel should therefore be                       data on travel, accommodations and tourism spending
income                                                                                by destination                                                                        thought of by destination markets as a gateway                              – “shopping accounts for a much higher share of total
Thousand of US$, 2013                                                                 # of nights per visit, 2013                                                           to greater future individual Chinese leisure travel.                        spending abroad by Chinese travellers compared to any
                                                                                                                                                                                                                                                        other market. 30% of the total trip price, excluding air
United Arab Emirates
                                                                                                   Canada                                                                                                                                               fares: the same percentage as for accommodation.”
            Australia                                                                     United Kingdom
              Norway                                                                                Brazil
        United States                                                                                  Italy
           Singapore
     Hong Kong, SAR                                                                          United States
              Canada                                                                                  India
                Japan
     United Kingdom
                                                                                                   France                                                    2013
               Austria                                                                             Taiwan
        New Zealand                                                                           South Africa                                                   2023
               France
                                                                                                  Thailand
            Germany
                                                                                                 Austrialia
             Belgium
                   Italy                                                             United Arab Emirates
                                                                                                                                                                                                                          Outbound travel from China by purpose of tripa
                 Spain                                                                            Malaysia
         Netherlands                                                                                                                                                                               2000                             2005                            2010
               Taiwan                                                                             Vietnam
                                                                                                                                                                                 Purpose of Trip
        Saudi Arabia                                                                                 Spain
         South Korea                                                                                                                                                                               (000 trips)     (% of total)     (000 trips)      (% of total)   (000 trips)      (% of total)
                                                                                              Netherlands
             Portugal
               Mexico                                                                            Germany                                                                         Public            4,843           46.2             5,886            19.0           5,693            9.9
             Malaysia                                                                     Hong Kong, SAR
                 Brazil
                Russia                                                                          Singapore                                                                        Private           5,631           53.8             25,140           81.0           51,697           90.1
         South Africa                                                                               Japan
                    Iran                                                                        Indonesia
                 China                                                                                                                                                           Total             10,473          100.0            31,026           100.0          57,390           100.0
            Indonesia                                                                          Switzerland
          Philippines                                                                               Russia
              Ukraine                                                                          Macao, SAR
                  India                                                                                                                                                     a) Passports for ‘public’ or offical and/or bussiness travel are issued to a wide range of categories, but
              Vietnam                                                                         South Korea
                                                                                                                                                                            mostly non-holiday travellers. ‘Private’ passports are issued to VFR and some leisure travellers. In
                           0           50              100               150   200                             0         5        10        15          20     25      30
                                                                                                                                                                            effect, business travellers could travel abroad on either type of passport, although they are more likely
                                                                                                                                                                            to have ‘public’ passports.
                    Source: National Statistical Offices, Tourism Economics                                          Source: UNWTO, Tourism Economics
                                                                                                                                                                            Source: ChinaNews [China Tourism Research Institute] (2011), European Travel Commission

                                                                                                                                                                             European Travel Commission and World Tourism Organization (2013), The
                                                                                                                                                                            13

                                                                                                                                                                            Chinese Outbound Travel Market– 2012 Update, UNWTO, Madrid.
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