Numbers and margins: Chinese take a tour – the WTO-column

(later also at Chinabiz)
“We get more and more Chinese tourists, but we are still not making any money.” The manager organizing trips for Chinese tourists to Europe is still optimistic. “We will be making money in the long run, their preferences will change.”
According to the official figures in 2005 31 million Chinese went abroad, up from 4.5 million in 1995. The numbers are expected to go up to 50 million by 2010 and 100 million by 2020, replacing even the US as the most travel-minded country.

It is no problem for any industry in China to get high numbers in terms of visitors or users. Tourism is now also experiencing huge flows of eager Chinese visiting Amsterdam, Brussels, Paris and Rome, just like the Japanese did when they were able to visit Europe in the 20th century. Busloads hit the European roads for trips that last ten to 14 days in an effort to visit as many cities as possible.
European cities are sending huge delegations to China, trying to figure out what those tourists want and how to get more of them. With some exceptions, the news is bad. The numbers might be high, but in most cases the margins are so low the increasing flow of tourists might be doing financially more harm than good.
Europe is already perceived to be very expensive, so the tourists spend most of their time in busses, bringing them from one place to the other. “In Rome we only had twenty minutes,” says one grateful Chinese customer. “That was a bit short but just enough to take the pictures we can show at home.”
The visitors do not enjoy the European culinary pleasures, because they feel it is simply too expensive. Most of the hotels did not offer Chinese meals, but that was hardly a problem for the tourists. “Because the breakfast was mostly included, we ate as much as we could in the morning,” says our tourist. “So we could skip lunch. For dinner we would mostly go to McDonalds. That was at least affordable.”

And so, the European tourism industry says they are in it for the long haul. “In the end also the Chinese tourists want more,” says the representative of a travel organization. “We have already done a special tour for Chinese tourists who want to stay every day in another European hotel.”
That might be true for a small pocket of Chinese tourists, but I’m not sure this will happen to the large majority.
Of course, twenty minutes for Rome is too short for any standard, even the Chinese one, but it might take a while before the Chinese tourists draw that conclusion too. The conundrum is similar to that of foreign companies like Unilever and P&G offering the Chinese customers more high-end choices for shampoo in the 1990s. Faces with 120 different choices in the average supermarket, they would mostly go for the cheapest product. If your industry cannot survive on low margins, you might have to forget about the Chinese masses for the next decade.

It is not because those Chinese tourists do not have the money. For example the diamond industry in Antwerp is one of the places where the same tourists who prefer dinner in a McDonalds to a local restaurant unload their cash. There they order and pay for products they think have an added value back home.
Too often managers in the tourism industry assume that Chinese want Chinese food, a Chinese hotel, and Chinese entertainment. Do not assume too much, I would say, ask them. See how they behave, see where they want to put their money and try to accommodate them. It sounds pretty straight forward, but too often companies forget to ask their customers what they want.

Fons Tuinstra