China rides crest of Asian tourism boom

YABULI, China Mon Dec 20, 2010 7:48pm IST

A policeman stands guard near the bullet trains serving the new high-speed railway linking Shanghai and Hangzhou in Shanghai October 26, 2010. REUTERS/Aly Song/Files

A policeman stands guard near the bullet trains serving the new high-speed railway linking Shanghai and Hangzhou in Shanghai October 26, 2010.

Credit: Reuters/Aly Song/Files

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YABULI, China (Reuters) - Take a fast-emerging middle class with money to spend. Add improving transport links. Mix in with fewer travel curbs and favourable official policies.

The result? A boom in domestic and outbound Chinese tourism seems baked in the cake. The same holds true for Asia as a whole.

"There is huge growth to come," said Nicolas Berbigier, chief executive of Xanadu, a travel agency in Beijing.

"Chinese consumers are finding it a lot more interesting to travel. They're finding it a lot easier. The yuan is expected to rise in value. Visa restrictions are diminishing every day and the government is pretty keen on pushing people to travel, at least domestically," he said.

China's 1.3 billion people each take on average just 1.3 trips a year. By 2015 the figure is projected to rise to 3.3.

The World Travel and Tourism Council expects the sector in China to expand by an inflation-adjusted 9.0 percent a year between 2010 and 2020, the fastest rate in the world.

That explains why Club Mediterranee SA has become the latest leisure group to plant its flag in China.

The French holiday operator has just opened its first resort in Yabuli, the birthplace of Chinese skiing about 180 km from Harbin in northeast China.

Club Med plans to have five locations in China within five years, by which time it will be the firm's second biggest market after France. It reckons 12 million Chinese on paper could be tempted to try its family-orientated resorts.

"Obviously, it's the biggest potential new market we have in the world," said Caroline Puechoultres, Club Med's chief executive for Asia Pacific.

Outside, temperatures of minus 25 degrees Celsius and a bitter wind whipping down from Siberia fail to deter enthusiastic skiers, many from Hong Kong and Singapore, where the resort's launch has been heavily promoted.

ECONOMIC TRANSFORMATION

The economic case for a boom in tourism rests largely on changes in China's labour market. As the supply of new workers tightens, wages will rise and boost consumption. And as people become better off, they will spend relatively more on services and less on food and other daily necessities.

"So the big winners from an era of rapidly rising wages are likely to in the service sector, for example tourism, healthcare and insurance," said Mark Williams with Capital Economics in London.

With China's GDP per head now around $4,000 a year, the conditions are ripe for explosive growth in travel, according to Zhu Shanzhong, vice head of the China National Tourism Administration.

China will implement a "national tourism plan" in the next five years that will mark the start of a "huge acceleration towards becoming a leisure society", Zhu said last week.

A large share of China's tourist spending is already flowing beyond China's borders.

Mainland Chinese made 47 million trips overseas in 2009, a figure that is expected to rise to 54 million this year.

By 2015 the government expects 100 million people to venture abroad, making China the world's biggest outbound tourism market.

HSBC, benchmarking China against the experience of Japan and South Korea, reckons the figure could reach 130 million.

Spending by Chinese overseas travellers would grow from some $43 billion a year to over $110 billion, of which $80 billion-$100 billion will be spent within Asia, the bank said.

Hong Kong is an obvious jumping-off point. The number of visitors to the territory in the first nine months leapt 23.7 percent to 26.2 million, with 63 percent coming from the mainland.

Tourism contributed a whopping 2.6 percentage points to Hong Kong's real GDP growth rate of 6.5 percent in the second quarter, according to economists at Nomura.

"Looking ahead, we expect robust growth in Asia -- and especially in China -- to continue to provide an important support to Hong Kong's economy via tourism, particularly the restaurants and hotels, travel and recreation industries," the bank said in a recent report.

RICH PICKINGS

The flood of Asian tourism, which has already made Chinese the biggest spenders at many European luxury goods retailers, was one reason why Airbus last week raised its forecast for aircraft sales over the next 20 years.

"Demand for travel is doubling every 15 years ... but in places like India and China we expect to double in the next six years," Airbus sales chief John Leahy said.

To tap into the demand in China, Club Med has teamed up with Fosun, China's largest non-state-owned conglomerate.

Fosun has taken an equity stake of nearly 10 percent in Club Med and is helping the French firm with acquiring prime sites, marketing, personnel training and procurement.

Their aim is to burnish Club Med's name in China, get customers hooked and then sell them holidays in the operator's 80 beach and ski resorts worldwide. Chinese travellers already make up half of the guests at Club Med in the Maldives.

"Those who are going to be able today to imprint their brand -- at the very beginning of outbound tourism -- are going to be able to make a killing," said Andre Loesekrug-Pietri, whose investment fund and advisory firm A Capital Asia co-invested in Club Med alongside Fosun.

Berbigier, the Beijing travel agency chief, also sees rich pickings in his sector for foreign firms, which have been allowed since August to apply for licences to organise trips inside China.

Apart from online travel agent Ctrip.com International Ltd, the market has no big player and is highly fragmented, he said.

"Anybody who manages to bring some structure to the market has huge potential," Berbigier said. "I'm flabbergasted how little involvement there is by foreign players."

(Editing by Richard Pullin)

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