Selling to China: Time to reconnect – here is why and how (Part 1)

Bad news first

Before the Covid pandemic disrupted global travel, China was well established as the biggest tourism source market in the world, with an accumulated 155 million outbound trips and a spend of USD 250 billion in 2019.

No other market even came close. Chinese travellers were highly sought after, either for their sheer numbers or for their high travel spend. Sometimes both.

The strict pandemic controls in China hit the local travel industry very hard.

This was especially true for the outbound travel industry, which was essentially forced to halt its international business completely. 

The industry had to survive by reducing operational costs dramatically while looking for alternative revenue streams, for example, by switching operations to the domestic Chinese market.

Since domestic and international travel are traditionally two separate worlds in China – even when operated under the same umbrella company – the outbound industry faced stiff local competition. 

Having lost their key advantage, international agencies were forced to make do with the new circumstances to at least preserve their key staff and networks.

What made matters worse for them was the lack of clear timeframe on when and how China might open up for international travel again. 

The whole market suffered, from tour operators to travel media, airlines to visa centres.

Everyone slashed operations to a bare minimum. In the outbound travel industry, the situation was so difficult that some industry players were forced to accept mergers, switch to domestic travel or develop completely new business fields, such as tax-free retail, just to survive. 

Large numbers of staff had their hours reduced, then were laid off completely, many were forced to find new income to make ends meet – and many left the travel industry for good.

This resulted in a huge loss of operational know-how and experience and disrupted supply chains and connections with partners abroad. 

Over time, it became evident the market would not simply restart after the pandemic; it would have to evolve into something new.

The Chinese outbound travel industry went on hold, into hibernation.

Now to the good news

With the policy changes at the end of 2022, first for general pandemic control, then specifically for travel, hope returned for China opening up again.

Hibernation was coming to an end and business could restart.

The external bottlenecks the industry faced on its road to recovery mostly concerned lack of capacity: hotel rooms were long since booked and or very expensive, international flight connections were still down, embassies could not handle larger volumes of visa applications.

But while at the beginning of 2023, China’s international flight connectivity was between 8% and 10%, by the end of the year, it had recovered to around 60%.

This increase in capacity was mostly down to Chinese airlines, who expanded their network, but a full recovery needs international carriers too.

Unfortunately, geopolitics influence flight recovery, with the crisis in the Middle East and the conflict in Ukraine forcing foreign airlines to avoid certain airspace, increasing travel time, operational costs and ticket prices.

Nonetheless, by summer 2023, most industry key players were back in operation – for the Chinese outbound travel industry to power out of hibernation in just six months was remarkable, but it also led some observers and media outlets to raise unrealistic expectations, predicting huge arrival numbers of Chinese travellers and a return to 2019 levels within the year.

But disappointment and negativity arrived. 

Anyone with real insight into the market knew it would take time and effort to rebuild the industry, to repair and realign the crucial components of a complicated and delicate machine until it could run smoothly and at full power again.

Apart from the supply side of the market, there is also the often somewhat overlooked demand side:

What is the Chinese post-Covid consumer sentiment?
Have traveller values and priorities changed?
How and to what extent have consumption and travel preferences evolved?
Will recent trends in domestic travel inform outbound travel? 

Now the pandemic is officially over, the travel industry needs to instil confidence in Chinese travellers and show them a trip abroad is safe and controllable, that overseas visitors are welcome again.

This also means product design and promotion must adapt to the post-Covid needs and interests.

The good news is much of that recovery happened in 2023 and 2024 will be about growth.

China has just enjoyed its first Spring Festival without pandemic restrictions, supported by a recovered local travel industry, and it seems the market has come close or even surpassed this period’s 2019 levels. The first reports for the peak summer season also look very promising.

This truly is an encouraging signal both for the Chinese and global tourism industry – it gives reason for optimism for 2024 and beyond.

Time to reconnect with China_article_deco

So why now?

There has been much talk about China’s economic slowdown, but it is important to remember that consumers who travelled internationally in the past 20 years are mid- to high earners. As in any economy, those with disposable income and wealth are more likely to weather the storm.

Their spending power is very much intact. While travel is not a necessity, over the last two decades, it evolved from being a luxury to being a normal part of Chinese modern or urban life – even a commodity. 

People who travel abroad regularly know what they like and have quite high expectations, which has pushed the international markets to respond, creating experiences far beyond the notorious low-budget group roundtrip.

The Chinese travel market is increasingly diverse, with products tailored to business and leisure, luxury to affordable, general to special interest. 

This trend emerged before 2019 but the pandemic made it stronger, and if the Chinese domestic travel market is any indication, this is indeed a long-term evolution, one which presents many new business opportunities.

New impulses and opportunities appeared in 2023, and now, in 2024, the market seems stable enough for suppliers to reach out again and start positioning brands and products.

This is a window of opportunity, a chance to make new connections, build new relationships and get a foot back in the door

Travel agencies may have changed or extended their business fields and require new products and supplier resources.

Longstanding contacts might have moved up in the company hierarchy, new joiners to a business might have few pre-conceptions – all are opportunities for your offer. Pole-position competitors of three years ago may have changed during the pandemic, shifting the landscape.

This could be your chance to step into their shoes.

Tourism is notorious for its long planning cycles, so while 2024 has big sales potential, this year is even more crucial for successfully positioning your brand and products in the market, to reap the strategic benefits later. 

One thing is for sure – no global marketing strategy can be complete without seriously evaluating the number 1 source market.

Summary

Pent up demand and revenge travel were the buzzwords of 2023, but they created unrealistic expectations and consequent disappointment about the speed of the Chinese outbound market recovery

Yes, if a consumer was limited to domestic travel and had no real opportunity to travel abroad for nearly three years, it is very likely they would want to travel again, but that does not mean ‘any’ international trip would do, post-Covid, or that the market would simply reset to 2019.

It is much more likely Chinese consumers’ domestic travel experiences will inform their preferences in international travel – and these will be different to before. 

In 2024, we will, I believe, see to what extent this is true, whether and how the market has evolved, and what its long-term strategic potential is.

There has been much speculation about when the market would return to pre-pandemic levels, in 2024, 2025 or later.

But surely, it is a moot point that misses the point: the Chinese market is clearly back in business.

And excitingly, the Chinese international travel market is still emerging.

What we have seen so far is merely the tip of the iceberg. Only around 8 to 10% of Chinese citizens currently have a passport to travel internationally, a tiny percentage compared to other major countries.

As more consider international travel an option, the growing interest and excitement we have seen in global tourism over the last two decades can only increase. 

Despite current economic challenges, the fundamentals of the market – flights, visas, demand – are improving fast.

There is a sense that this is the moment to engage with the market and develop business from China.

This is the time to reconnect.


Oliver Sedlinger

Oliver Sedlinger is co-founder and CEO of Sedlinger & Associates.

He represents first-hand, on-the-ground expertise for the Chinese outbound travel market.

Embedded in the market since 2000, he has served different roles and functions, developing unique business networks, know-how, experience and market insights, which he and his team put to use for their clients.

 

Sedlinger & Associates Tourism Marketing Consultants

Sedlinger & Associates is a consulting company specialising in the representation, marketing and sales to the Greater China outbound travel market.

Our clients come from across the global tourism industry, from destination marketing, accommodation, incoming, transport, retail, services etc.

Our clients are united in their drive to develop their business in this crucial growth market.

 

Sedlinger & Associates is a member of the World Hospitality Alliance.

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