China's Inbound Tourism: Development In Adversity

The inbound tour business occupies an important position in the international tourism sector, and the number of inbound tourists who stay in a destination for at least one night and the resulting foreign exchange earnings are important indicators in measuring a country's tourism strength.

Inbound tours are also a major way for many countries, including developed and developing ones, to earn foreign exchange and boost employment. A country's inbound tourism status and its position in the international tourism industry, is a very important reference point for the development of the country's tourism and economic policy.

Because of a number factors in the first nine months of 2008 the number of inbound tourists in China decreased. The latest statistics issued by the China National Tourism Administration indicate that in October 2008, the number of inbound tourists to China was 11,220,000, a decrease of 3.22% compared to the same month of 2007. The number of overseas tourists visiting China decreased by 11.5%. Facing the decrease of inbound tourists, some Beijing tourism enterprises have adjusted their plans so as to respond in a flexible way.

The current global financial crisis has had an impact on the Chinese inbound business, resulting in a sharp decrease of inbound tourist sources, especially from Europe and America markets. In addition exchange rate fluctuations add unfavorable factors on the travel agencies' inbound business. Because of this, the travel agents have said that they would take into consideration the risk of exchange rate fluctuations during future operations and will prefer to give quotations in RMB.

In the recessionary macroeconomic climate, launching new itineraries with lower prices is a good way to attract those inbound tourists who have a wait and see attitude. For example, CITS Head Office has launched new attractions and new destinations, which are very popular with new clients and are very attractive for those who have visited China before.

The tourism industry will face a grim prospect for the inbound tourism market in 2009, and its responses are obviously flexible. Some professionals say that the travel trade will need all of 2009 to strengthen its internal operations, with staff training, and new product research and development, and thus being well prepared for the 2010 Shanghai World Expo.

CITS Head Office Develops New Inbound Tour Products

Yu Ningning, assistant to the president of China International Travel Service Head Office, said that due to the impact of the financial crisis and exchange rates, a negative growth in 2009 is to be expected. CITS Head Office always focuses on the inbound tour market, which is also a major source of its foreign exchange income, and the current international financial crisis has had a lot of impact on its inbound tour business.

"Chinese people spend their own money on traveling, while foreigners spend the banks' money for that." Yu stated. Hit by the financial crisis in 2009, tourists might delay their spending, and would not book one or two years in advance as they did before. Now customers will make a decision on travel consumption according to the current situation. It is estimated that there will be a decrease of at least 10% in 2009. Yu expressed the opinion that under a major financial crisis, and with unstable exchange rates, travel agencies would try to reduce those losses caused by exchange rate fluctuations. Under such circumstance, it will encourage clients to accept the quotations by the RMB.

In addition, CITS Head Office has also responded actively to the market, developing three new inbound tour products including the four ancient Chinese capitals tours, eastern China canals tours, and Chinese religious tours. These products all contain new items, for example, Beijing tours have new attractions, such as Olympic venues, the Water Cube and the National Stadium, and clients have given very good feedback on this. Outside Beijing, some new destination cities have been launched, such as Yangzhou, Nantong, and Rugao. These boutique spots have new and rich tourism resources and are highly appreciated. These new products with low costs and economic prices give clients more options, and have received good evaluations from them.

Yu said that compared to traditional tour products, MICE products have lots of special characteristics, so it is difficult to compare prices. The profits of MICE business are very high, so CITS Head Office will spare no effort developing and expanding in the MICE sector in 2009. Next year, the company is to develop new markets, launch new products, improve the business staff quality, and to enhance the reception quality, in preparation for the 2010 Shanghai World Expo. For the time being, the MICE sector would experience a good growth from the second half of 2009 to 2010.

With the increasing number of new star-grade hotels, there are more and more opportunities for travel agencies looking for hotel partners. Facing the problems of the financial crisis and exchange rates in 2009, travel agencies hope that hotels would give support with regard to exchange rates, adjusting their prices in a timely way to share part of the differences caused by exchange rate fluctuations.

Japanese Inbound Source Market Rationalizes
Xu Min, vice director of the Japan department of China Women Travel Service, along with the Beijing tourism promotion delegation, participated in a tourism meeting held in Japan on November 2008. In addition to attracting ordinary Japanese tourists, the delegation also focused on the mid and high-end tourists for MICE, leisure vacationers, and FIT, as well as study tour groups, aiming to boost the growth of the post-Olympic inbound market in Beijing, and to revive the whole Chinese inbound tourism market. Xu said that in 2008 because of factors such as the dumpling incident at the beginning of this year, the violence in Tibet on March 14, and the Sichuan earthquake on May 12, the number of Japanese inbound tourists to China decreased in different degrees from previous years: particularly since both Tibet and Jiuzhaigou are popular destinations for Japanese tourists. Since the overall environment of the tourism industry in 2008 was not ideal, and because of the current financial crisis, there has been some impact on CWTS' inbound business from certain parts of the Japanese market. CWTS is still receiving student groups, religious groups, and corporate groups from this September onwards, with the overall status remaining satisfactory.

With the Korean Won exchange rate against Japanese Yen going down due to the financial crisis, South Korea has become a popular destination for Japanese tourists who like to go shopping there, and it has become one of the big competitors for China. Meanwhile, major companies in Japan are cutting their travel expenses, and they would not always select China as the outbound destination. Xu said that Japan will no longer be a prime inbound source market for China; in 2007, Japan was ranked in third place among Beijing's inbound source markets, and the current decrease in numbers of Japanese tourists to China is a normal phenomenon of travel consumption gradually becoming rationalized. So this is not caused by the financial crisis alone.

Of the Japanese tourist sources of CWTS, 70% are package tour groups and 30% are FIT. Asked how to offer value-added services, Xu said that the key is to customize suitable itineraries for customers. As the financial crisis has not had a direct impact, the prospects for 2009 would still be affected by factors such as food security and the earthquake. Next year would be better than this year, now everything has returned to normal. Major enterprises are expected to reduce tourism related activities slowly. At the tourism promotion meeting held this November, the Beijing Municipal Tourism Bureau said that it will focus on developing study tours to Japan by launching a premium policy with a fund of CNY2 million to encourage Japanese travel agencies to organize tourists visits to China, and also on special themed study tour products. CWTS will take advantage of these favorable measures to develop study tours business.

UK Inbound Tourist Sources Are Becoming Polarized
Li Jun, managing director of China Holidays Group, said that a decrease in the number of inbound tourists from the United Kinngdom to China is due to unusual factors. Because the UK is a developed country with a major financial industry it has been greatly hit by the current financial crisis. Firstly, due to the impact of the financial tsunami, the British have been cutting back their travel plans and budgets, while large companies will also reduce their budgets for MICE events, or short-term activities. Secondly, in recent months, the exchange rate of the pound sterling fell against Chinese RMB, resulting in increased travel costs for British tourists. In addition, the sharp devaluation of the pound also increased the worries from the industry on the British market in 2009, domestic travel agencies have usually offered quotations for 2009 to their clients in the first half of this year, and many of them calculated accounting costs and made offers according to the exchange rate between the RMB and the pound when launching product brochures which included published prices. Domestic travel agencies and tour operators did not anticipate a sudden decrease of exchange rates in recent months, if the exchange rates do not go up again over next year, this will be a dilemma for the travel agencies: if they continue to implement the original prices, this would bring a great loss; if they increase the prices according to new exchange rates, this would have an impact on the source of tourists and their credit in the market. Li says that this financial crisis has reminded trade partners, that since exchange rates were relatively stable in the past, that travel agencies seldom took into consideration the exchange risk and their quotations always were made in US dollars or in the currency of the tourist source country. Learning from this they plan to give clients in RMB or both currencies.

For the overall inbound market environment in 2009, Li thought that the travel agencies should develop new markets, and the tour products would become polarized into high-end and low-price categories. Most British tourists traveling to China are generally high-end customers with good economic circumstances, who are less impacted by the financial crisis and will continue traveling abroad, so domestic travel agencies could develop new high-end tour products to meet their requirements. Current Chinese inbound tour products focus on visiting cultural relics and lack pure entertainment themed products, so it is very necessary to develop high-end entertainment products and improve the level of services, guides, accommodation, and vehicles. For ordinary tourists, the low price products will mainly focus on simplifying the itinerary or enhancing FIT itineraries, by reducing the number of days of the original itinerary or increasing the free time.

"There are always opportunities no matter what happens. Do not only blame the market. A bad environment will be testing for a lot of people, who need to focus on developing special products, and improving service quality." Li said. There is no doubt that the market will be difficult in 2009, even if the overall trend is in decline, the base number of the inbound tourists in China is still huge, and the travel agencies should consider how to attract the most tourists from limited sources because the market is finite.

As for the complaints from inbound tourists, Li said that were mainly about shopping and dining. Too much time is spent shopping and the goods are not unique; Chinese dishes are always the same, and Western tourists hope to taste a more varied Chinese cuisine, which should differ at each destination in China. In addition, the quality of guides needs to be improved.

Since the 2009 tourism market is expected to slump, travel agencies could have time to think consider and make some adjustments; not only focusing on the big market, but also focusing on developing each market and researching new and special products, and enhancing the training of guides to maintain quality and get through the year. Eventually the situation will get better. Lastly, Li said that China Holidays Group will promote its own inbound tours website to attract tourists from around the world to book inbound tour products to China through the website, so it could expand its tourist source in the UK.

Inbound Reception Aims To Provide Service Beyond Expectation
Liu Ping, chairman of board of Beijing Xinxinjixiang International Travel Service, said that the company focuses on inbound MICE business, currently customer reservations are slowing down due to the impact of the financial crisis, so that travel agencies should look carefully at every single quotation. For bespoke groups, travel agencies have began to take the initiative in cutting prices and understanding the customers' point of view, and so building mutual confidence. Customers would know that the initiative to cut prices is for their sake. For some specialized groups there has been little impact. In general, this year the prospects for the coming year cannot be foreseen, what has to be done now is to seize every opportunity, with better quotations than before.

Liu thought dealing with the financial crisis is a psychological process, demand would come back after a time. It is not necessary that the travel agencies just run expensive tour groups and low cost does not equate to low quality. For MICE activities, there are many innovations need no money. In addition, the company will increase rather than reduce its investment, and will participate in more international travel fairs. In 2009, the company will expand in those domestic markets that it has not focused on before, and will operate the regular travel business based on its MICE experience, aiming to offer customers with value-for-money services.

With regard to selecting hotels, Liu said that there are more and more hotels, and different customers have different requirements, for example, some of them hope to live in hotels with Chinese characteristics, rather than large hotels. At present, the travel agencies mostly select international brands. International hotel brands have staff that speak good English, have no communication problems, and offer comprehensive services. Liu hoped that these hotels could improve their service quality with the increased development of the MICE market, for example by extending the business times of some operational venues like bars, offering the company credit guarantees, not making the guests check in one by one, having well coordinated sales and receptionists, improving the level of foreign languages, dealing with non-smoking areas, and adjusting the ratio of smoking to non-smoking venues.