In their report 'The Keys to the Kingdom' Boston Consulting Group concluded "Our findings indicate that the distribution of income for urban residents will shift significantly upward over the next ten years. Indeed, disposable income per capita is expected to double in nearly 600 locations in China from 2010 to 2020."
"By 2020 the size of China's urban middle class will likely have doubled and its affluent middle class (upper and lower) will have increased nearly four times over. More than 130 million urban households will be living at the middle-class level or above."
Bottom line: After a long period of Chinese becoming richer we are currently witnessing a transformation in income levels, where large parts of the population are shifting into the real middle class and have serious money to spend on consumer goods and travel.
In 'The Keys to the Kingdom' Boston Consulting Group also notes: "In 2005 a company needed to be in approximately 70 locations if it wanted to reach 70% of China's Middle and Affluent Class Consumers. By 2020 serving these consumers will require a presence in over 400 locations."
In other words: Real income growth is taking place all over China and not just in the Tier 1 and Tier 2 cities. This creates endless new opportunities for Western companies - but realistically only a handful of them would ever be able to reach the potential tourists and consumers through traditional retail channels, travel agencies etc.
Luckily, with smart online marketing they are all within reach.
China's society is transforming beyond all recognition - a process driven by the emergence of China's new urban middle class, whose size is larger now than the entire US population.
The facts: In 2000 only 4% Of urban households were middle class. In 2022 it is expected to reach 630 million - equaling 75% of urban households and 45% of the entire population.
Needless to say the increase in wealth has resulted in consumers becoming more and more accustomed to a variety of consumer goods and brands - and in the process also more sophisticated and individualized in their preferences.
The very same trends are now transforming the outbound tourism industry - from low-end low-quality group travel products to individualized solutions for FITs.
China is the second largest market for digital cameras in the world, second only to the US and buying more units than Japan, South Korea and Singapore combined.
China is the world's largest market for laptop computers.
Chinese are rapidly starting to use completely new products. For example, the sales of laundry softener has grown by 20% annually for the past 8 years and exceed sales in Germany.
Consumer habits are changing rapidly. In 1999 when Starbucks opened its first store in China everyone 'knew' Chinese did not drink coffee - it was too bitter. Today Starbucks has more than 1500 shops in China. Packed with Chinese…drinking coffee.
Even such products as butter, cheese and milk - which used to be completely alien to Chinese consumers - are now becoming regular items in Chinese kitchens.
With 150 million international travelers and a rapid change in the way they travel it doesn’t make much sense to generalise information about ‘the Chinese tourist’.
We continue to marvel at analysts and reports claiming to provide relevant information about the 'new Chinese tourist' - only to provide meaningsless and generic descriptions like: "60% are between 25 and 45 and 80% have an annual income of 10,000 euro or higher". Sure - maybe now tell us something that isn't completely obvious?
The fact is, that Chinese tourism is undergoing a dramatic change - just like the rest of the Chinese consumer market has been doing for the past 15 years, and the best advice is to apply common sense and to look forward without being stuck in past percentions.
How Chinese Tourists Got Their Bad Reputation
China’s 1st generation tourism was characterised by very little interest in experiencing the local culture, summarised by the Chinese phrase: 上车睡觉，下车拍照 ("On the buss: Sleep. Off the buss: Take photos”)
This form of travel was sustained by greedy tourist agencies who preferred to keep business as usual and too uninventive to develop better quality products.
As a result of this approach to travelling Chinese tourists have generally been treated as second-rate tourists. But as China has become richer the Chinese are rapidly becoming more sophisticated. They want to broaden their horizon and increasingly they want to travel without being surrounded by hordes of other Chinese, and experience local culture, art, history and food.
At the same time the Chinese are utterly tired of being bundled in a simple category of ‘let’s get their money and then get rid of them’. All over Western Europe service providers have been all too happy to take their money - without offering them a truly welcoming and unique experience.
More and more shops and hotels - and even countries - are starting to realise that the new Chinese tourist also expect to be treated like appreciated customers.
These trends are also fuelling the recent boom in Chinese tourism to Eastern Europe, where they not only face fewer fellow Chinese tourists, but also a highly appreciative atmosphere and competitive prices.
The bottom line is really very simple: If you base your business on tourguide-led-group-tourism this is what you will get: The ever lower end of the market.
If you instead base it on attracting the quickly growing segment looking for quality experiences, that is what you will get.
At Shanghai Jungle we are committed to creating exceptional travel experiences for the new Chinese FITs - and to help the cities, attractions, hotels, shops and restaurants who share this commitment.