Luxury tourism is a growing and profitable segment of the travel industry For Ge Mu, the most exciting and satisfactory thing about the World Cup did not lie in the tournament itself, but in getting some hardcore fans to Germany to see the games live during the recently ended football classic.
Ge, Marketing Operations Supervisor of the Beijing CAISSA International Travel Service Co. Ltd., organized a 500-member tour group to go to Germany to see the football carnival. “It gave me great pleasure and excitement to make a successful World Cup tourism product,” she said.
Ge is involved in an increasingly promising business--what industry insiders term the “high-end tourism market”--featuring luxury consumption for group tours. For the World Cup, the Beijing CAISSA International Travel Service Co. Ltd. designed one-week trips to see matches involving strong teams from such countries as Brazil, Argentina, Italy and the Netherlands, with the lowest cost at 30,000 yuan and the maximum at 50,000 yuan, watching one match only.
The travel agency that Ge works for was formed in 2003 as a venture between Germany-based CAISSA Tourist Group and China’s Poly Group Corp. In Ge’s view, the World Cup tourism product was something that CAISSA had to offer because all the conditions were favorable. It is also a good opportunity for brand promotion, especially at a time when luxury tourism is becoming vital to the competitiveness of travel agencies. In the long run, high-end products can generate larger and more sustainable profits.
High-end tourism, said Wei Xiao’an, Deputy Director of the China Tourism and Culture Resource Development and Promotion Association, features individualization, as well as high cost. Trips are tailored to satisfy individual needs.
As an increasing number of Chinese aim for a higher quality of life, and can afford it, tourism activities are evolving from sightseeing to a higher level of satisfaction. These people are not satisfied with a hurried or regimented travel arrangement, and the decisive factors in choosing a tourism product come down to the uniqueness and comfort of a trip, which overtakes the previous major consideration of cost.
“Regular tours are too compact and we feel we are pushed to travel. We seldom get to just enjoy ourselves,” said Yang Hong, a piano teacher from Guangdong Province. She wanted to travel to Hainan Province last year with the parents of a friend, and asked the travel agency to arrange a package that involved a four-star hotel, independent transportation and no shopping. “Though it cost much more than previous trips, the tailored service was worthwhile as we all felt satisfied,” said Yang.
Zhang Ping, a businessman in Beijing who just returned from a European trip, said high-end tourism has higher standards for food and lodging, a loose travel schedule and unique activities. “It’s costly but we really appreciate the heartfelt enjoyment brought to us when we tourists can delve deeply into the local conditions and customs,” said Zhang.
Low-profit industry
Many tourism industry insiders hold that the traditional tourism market has entered a time of meager profits. There is little room for price reductions on standard tourism products, and the profits of travel agencies have been falling. In order to survive, travel agencies must steer tourists to shop in selected places, which has bored the tourists. Many people are attracted to independent travel, which is more costly but less safe. Thus, travel agencies have come up with some high-end products that can meet consumers’ individualized needs.
“The high-end tourism market is taking shape in China, which is a good opportunity for the travel agencies to promote themselves and win a bigger slice of the pie,” said Li Jilie, Board Chairman of China Comfort International Travel Co. Ltd.
The luxury market is not limited to affluent individual travelers, however, as business travel plays a major role in this area.
According to the World Tourism Organization, the main purpose of business travel is to attend an activity or event associated with a person’s business or interests, including conferences, exhibitions, trade fairs, corporate events and meetings, and incentive travel. Business travel, which usually generates considerable profits, is considered a gold mine to be tapped.
Foreign trade can boost a country’s economic development and stimulate the growth of tourism as well. Foreign companies have pumped $1 trillion of investment in China since it initiated reform and opening-up in the late 1970s. Accordingly, the Chinese tourism business has grown rapidly, with annual international business travel expenditures hitting $4.2 billion, which makes up 17 percent of the Asian business travel market. Expenditures on domestic business trips total $20 billion each year. Business travel in China is increasing at an annual rate of 20 percent.
A report issued by the Beijing Tourism Administration in May shows that in Beijing, business travel accounted for 46 percent of the total in 2005, an increase of 27 percent over 2004. The per-capita consumption for those interviewees who have business travel in Beijing is $1,125. The per-capita daily expense for a business trip is 635.86 yuan, 28 percent higher than that for sightseeing tours. Most of the business travel expenditure covers lodging, food and transportation.
The high-end tourism consumption group consists of people who have a high and stable income. They have increasing demands for shopping, travel, food, health care and entertainment. Most are managers, white-collar workers, celebrities and government officials, the report said.
The ‘incentive’ market
The report also showed that incentive trips have a huge market potential. Some companies in China are generous in encouraging their employees, providing free travel for those who achieve their specified goals. A manager of a big private company said he thinks the incentive trip concept is vital to modern management. Its purpose is to help the company accomplish its objectives and “it goes without saying, to reward meritorious workers.” Statistics from the travel agencies show that the profit from an incentive trip group is five times that of an average tour group.
“Incentive travel is becoming a new growth area, thanks to its large market potential and stable profits,” said Zheng Hong, Board Chairman of GZL International Travel Service Ltd. Incentive travel is financed by companies who entrust travel agencies to design extraordinary travel plans for their employees. “Incentive trips must be unique and should leave the tourists with an unforgettable experience,” said Zheng.
A couple of years ago, Metropolitan Life Insurance Co. (Beijing) spent $4 million on an incentive tour for 400 people, according to Yang Yushan, Chairman of China Peace International Tourism Co. Ltd., which arranged the trip. He added that business trips, international conferences and incentive trips are major areas his company has been exploring. The company also joined the Society of Incentive Travel Executives, becoming its only member in China’s mainland. What’s more, it has registered its China Incentive Trip website in the United States, hoping to link the traditional tourism mode with electronic commerce.
However, such incentive trips have very strict product design and service standards and aim to provide a unique cultural experience. Wang Qing, an official with the Beijing Tourism Administration, pointed out that high-end tourism needs cooperation from various sectors to handle environmental, transportation and security problems. Support from the government is also necessary, he said.
Beijing began to develop its high-end tourism project in 2000, but so far it hasn’t gained much public recognition, partly due to the lack of promotion.
The competition among high-end tourism products focuses on two things: individuality and uniqueness. According to Wei of the China Tourism and Culture Resource Development and Promotion Association, standard tourism products vary very little, with competition chiefly focusing on price, while high-end tourism products are not standardized. “Judging from international practice, high-end tourism has evolved from standard products to individualized service. Not too much money, but the best tourist service--that is what high-end tourism is really about,” he added.
Despite the growth, high-end tourism in China still lags far behind the regular tourism industry. Statistics show that it accounts for less than 1 percent of the global high-end tourism market. Thus, viewed from another angle, it has an enormous space to develop.
A Tourism Partnership
In April, the Beijing Tourism Administration and Reed Exhibitions, part of the Anglo-Dutch Reed Elsevier Group, announced a strategic partnership in recognition of the huge growth potential of the conference and exhibition industry in China.
Reed Exhibitions sponsored the Second China International Business and Incentive Travel Mart (CBITM) in Beijing from July 11-13, the only high-end exhibition dedicated to business and incentive travel in China.
Last year, business travelers accounted for around 46 percent of the total number of tourists to Beijing. Experts believe that with the substantial increase in the number of people traveling overseas for business, Beijing has reached a critical time to develop the high-end, or luxury, travel sector in a comprehensive way. Considered a “gold mine” of the tourism industry, the luxury travel sector is not only attracting tourism professionals, but also receiving attention from local governments and tourism management departments.
The quality of high-end tourism calls for all-round cooperation, including government support and efforts made by tourism professionals, industry experts say. From June to September last year, the Beijing Tourism Administration, at the request of the municipal government, conducted a survey of the capital city’s high-end tourism market. As the 2008 Olympics is approaching, the municipal government and the tourism management department of Beijing hope to substantially increase the city’s share of international luxury tourism.
“With the municipal government’s support, we will develop the high-end tourism market in a comprehensive way. Reed Exhibitions is very experienced in organizing international exhibitions and developing high-end tourism, which happens to coincide with our strategic market plan,” said Wang Qing, an official from the Beijing Tourism Administration who is in charge of international incentive travel. Wang also believes that the cooperation between the two sides will stimulate the rapid development of the high-end tourism market in Beijing.
Reed Exhibitions is the world’s leading exhibition and conference organizer with a portfolio of over 470 events in 29 countries. The CBITM is working to ensure that both exhibitors and buyers benefit from its carefully tailored service offerings.
Last year, over 172 companies from 25 countries and regions attended the first CBITM, including such renowned transnationals as Siemens, IBM, Hewlett-Packard, Bayer and IKEA. The number of buyers for this year’s exhibition is expected to be 50 percent more than last year, said Liu Guoliang, Vice President of Reed Exhibitions China.
Dan Londero, President of Reed Exhibitions China, said the purpose of holding the CBITM was to promote the rapid development of the high-end travel market in China and to create a platform for communication and cooperation among thousands of buyers and sellers of tourism services from all over the world. “Our cooperation with the Beijing Tourism Administration shows that our effort has been highly recognized by the Beijing Municipal Government,” Londero added.
According to Londero, Reed Exhibitions has the long-term goal of making Beijing a base for his company’s international business and incentive travel exhibitions, forming an “iron triangle” with two other branches--the European Incentives and Business Travel Mart in Barcelona and the Gulf Incentive, Business Travel and Meetings Exhibition in Abu Dhabi. Meanwhile, the International Congress and Convention Association, the Meeting Professionals International and the Society of Incentive and Travel Executives will provide full support to the CBITM and strive to make it the most influential incentive travel exhibition in Asia in three to five years.
The cooperation between the Beijing Tourism Administration and Reed Exhibitions is considered comprehensive and in-depth, with its focus laid on infrastructure construction for the high-end travel market in Beijing to satisfy the demands of a growing number of high-end travelers from all over the world. Apart from holding international business and incentive travel exhibitions, both sides have plans for training, attracting investment and holding symposiums and summit meetings.
Liu noted that foreign buyers are interested in this kind of exhibitions. Regarding the potential volume of business transactions, Liu said, “Travel exhibitions differ from industrial exhibitions, in which participants make deals on the spot. We are supposed to help sellers and purchasers establish long-term relationships. Therefore, we don’t have exact statistics. But the overall situation is very promising.”