Westin has over 230 hotels and resorts in 36 countries and districts in the world. It focuses on the market of high-end consumers. All Westin hotels are recognized by local authorities as five-star hotels. Westin prefers to place its hotels (resorts not included) in city centers, providing its customers with the most convenient location if they want to go sightseeing or shopping. Westin’s 160 hotels and resorts are all known for their modern design, exceptional customer service and relaxing atmosphere.

Westin Hotels & resorts provides customers with relaxing accommodations for them to come back to after spending a day enjoying the surrounding locations. Each Westin Hotel is located in areas that offer unique experiences for its customers. Westin has a history of focusing on wellness, and it continues its commitment to its travelers’ well-being and healthy lifestyle.

What is unique about Westin in China

Westin now operates 25 hotels in China Mainland: four in Guangdong, four in Hainan, three in Zhejiang, two in Beijing, two in Fujian, two in Shandong and one in each of Anhui, Jiangsu, Jilin, Hubei, Shanxi, Tianjin, Wuhan, Shanghai. The above hotels are located in Tier 1 or Tier 2 cities. Currently, China is home to the second largest number of Westin hotels worldwide, second only to the United States. In China’s luxury hotel market, Westin ranked eighth in terms of the number of hotels among all international 5-star hotel brands in 2008, while Sheraton had the most number of hotels (70).

Increasing demand in China’s luxury hotel market brings opportunity for Westin China

Since entering China in 1991, Westin has targeted wealthy Chinese customers. In the last 20 years, China’s promising GDP growth and increasingly affluent consumers have led to high demand for luxury goods and services. The growth of high-yielding consumers contributes to the blooming of the domestic high-end travel and China’s luxury hotel market.

According to GlobalData, China was the largest luxury hotel market worldwide in 2018, with year-over-year (YOY) growth of 18.3%. In 2019, China’s luxury hotel market still had a YOY growth rate of 10.2%. It is predicted that China will continue this momentum in the next few years with a growing number of high-net-worth citizens.   

How Westin adds Chinese elements

Westin also pays close attention to the local culture of the city and the country where its hotels lie and holds cultural events to accommodate these differences.

In Wuhan, Westin held a luxury traditional family reunion dinner to celebrate the Spring Festival. The event offered Westin customers dishes from different geographical regions of China. Various types of tea were also available.

In Hefei, the Westin held a “Mooncake Show” in late August. The show was held in preparation for the Mid-Autumn festival where mooncakes are traditionally eaten. The Westin offered each of its customers four different mooncakes at the show to give them a little taste of China.

In Beijing, the Westin offered its customers a variety of crab dishes. Chinese people love to eat crab in Autumn, but crab is not farmed in Northern China. The Westin gives Northern consumers a chance to enjoy a delicacy that they normally cannot enjoy.

Westin in China：leveraging the power of new marketing. Co-branding marketing

Source: Westin China’s Weibo, Co-branding marketing of Westin China × KEEP

Partnering with “KEEP”, an easy-to-use  Chinese fitness app, Westin is able to improve customer experiences and strengthen its brand image. Westin and KEEP cooperate to satisfy business travelers’ sports needs by providing a full range of fitness activities. 

The collaboration covers in-room courses, running-related and fitness center courses. First, for in-room courses, KEEP and Westin jointly open exclusive TV channels provided in Westin Hotel. Based on the space environment of hotel rooms, KEEP customizes a set of sports courses suitable for hotel guests to exercise in the room. Second, Westin China adjusted its “RunWestin” program, generating its characteristic health running map route in the KEEP App. Hotel guests and city runners can easily use the Westin health running map in the App, and the App can record and collect related personal performance data. Third, for fitness center courses, KEEP also provides Westin with a complete solution, including training, yoga and other courses. These are to better serve the personalized fitness needs of travelers. Hotel guests can easily scan the QR code in the hotel gym to get recommended courses and enjoy working out. 

Why the Westin x KEEP co-branded marketing works

Why is this innovative collaboration so successful? Two similarities between two partner brands can explain this.

First, both brands advocate healthy lifestyles and emphasize keeping fit. Westin hotel has focused on fitness since it was created and is committed to bringing customers health and wellness in addition to a comfortable accommodation experience. Westin promises to enable guests to maintain their workout routine during they stay in the hotels. Such a promise aligns with KEEP’s brand image that has always been centered on creating a “free sports ground”. Based on the same idea, two brands can join forces to help travelers stay fit and have a healthy lifestyle.

Second, two brands share a similar customer base. Westin and KEEP team up to explore the material and emotional needs of high-end traveler groups. Through this cooperation, both parties leverage rich experience in different fields to jointly develop deeper customer insights, and achieve a full range of sports needs for the target customers.

Innovative marketing method achieves better results

Different from simple co-branding marketing, in which two brands only jointly hold activities or produce products, the cooperation between Westin and KEEP has more significant meaning and better results. It embodies a common vision of two parties, and tightly integrates brand values, market experience and customer insights.

Partnering with KEEP, Westin creates some brand new elements to its traditional hotel identity. Hotel’s high-tech hardware facilities and services activated by the Internet help Westin shape a more active and rich brand image. Westin will attract more loyal guests by offering them one-stop solutions for sports needs in traveling. 

New marketing strategy: social media marketing

Nowadays, social media has built an instant and tight connection between brands and customers, especially for the hospitality business. More and more Chinese are used to checking peer reviews and comments on popular Chinese social media like Weibo, Xiaohongshu and Tiktok before purchasing products or services. In these cases, social media plays a vital role in deciding travelers’ purchasing choices. Several Westin hotels, which are instagrammable luxury stays, earn their reputation on Chinese social media.

Source: Weibo, Red –KOLs’ posts about Westin China

On Chinese social media platforms, it is easy to find some KOLs (Online Key Opinion Leaders) posts about people’s stay experiences at Westin hotels. Their posts usually show the luxurious decoration, comfortable environment, considerate service and stunning views of the hotels. With more and more KOLs sharing wonderful stay experiences, Westin raises its awareness among Chinese consumers. Currently, Westin hotels in some cities, like the Westin Chongqing Liberation Square, have become “internet-famous” hotels, attracting tons of travelers to stay or just take pictures.

Source: Weibo, Red –Consumers’ posts about Westin China

Many people, especially millennials, are keen to share their high-quality lifestyle experiences on social media. It is trendy for them to post fantastic photos of the hotel and share their feelings when staying in the hotel. These posts can have millions of views, and thus cause a “network effect,” which helps advertisement for the Westin.

Recovering from coronavirus: upscale hotels should take “smart” strategies

The tourism industry and the hotel market have suffered huge losses from the coronavirus outbreak. In order to reduce loss and raise occupancy rates, many hotels made dramatic price-drops during the period of the COVID-19 pandemic. Until now, a lot of hotels have still dropped the price to entice consumers. However, it is not a wise strategy, since starting a race by dropping the prices will hurt profits across the entire industry. All hotels will lose out and it would be hard for the hotel market to recover from the crisis. In addition, price promotion strategies may have a negative impact on brand images of upscale hotels like Westin.

To recover from the COVID-19 pandemic in a relatively short time, hotels could take action more smartly. For example, they should offer more “value-adds” services to attract travelers, like Westin’s co-branding marketing. Also, leveraging popular Chinese social media to have users advertise for brands seems like a wise marketing strategy.

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This article Westin in China embraces new trends in marketing for upscale hotels is the first one to appear on Daxue Consulting - Market Research China.

Find here the China paradigm episode 95. In this interview, Sophie Sun, Founder and CEO at TravelRight tells how her company targets Chinese outbound travel to Europe and delayed flights of Chinese passengers with a unique business model.

Full transcript below:

Hello everyone. This is China Paradigm, where we, Daxue Consulting interview season entrepreneurs in China.

Matthieu David: Hello everyone. I’m Matthieu David, the founder of Daxue Consulting and its podcast, China Paradigm, and joining me today is Sophie Sun, the founder and CEO of TravelRight. TravelRight is a company that helps you to get your money back when there is a problem with your travel and we are going to try to understand how the product is built. Is it an interesting product for the delayed flights of Chinese passengers? Is it a product that helps you claim your rights toward those airlines and any travel agents or intermediaries? Let’s look at a few numbers. What I didn’t mention, but it is obvious that we are focusing on China. It is travelright.cn and we focus on China. So, let’s look at what it is to work in Chinese outbound travel to Europe. We talked about a market which is not as big as what we could think of when we think about the 1.4 billion inhabitants, but which has been growing very, very fast and very steadily. Now, we talk about 165 million outbound travels. That’s a common mistake to think of is that we very often are confused about travelers and travels. The statistic we are talking about concerns travels. So, the number of travels is much lower and the number of Chinese having a passport to travel actually is still low contrast to the population, so there is a lot of room for growth. That’s something everyone is looking at even though with the current situation. I think they are going to slow down, certainly in 2020. We talked about 35 million flight tickets bought and as a pillar of protection and I am talking about that; the protection because that’s where you are playing. It is with the protection of the consumers. So, thanks for being with us, Sophie. You started TravelRight 2 years ago if my information is right. Before starting TravelRight, you had been working at a very, very big company called Alibaba for 3 years and that’s something we will look into is what you learned from Alibaba to start your business. So, thank you, Sophie, for being with us and the first question is, what is your company doing?

Sophie Sun: Hi Matthieu. Thanks for giving the interview.

Yeah, you are perfectly right. You did very deep research. TravelRight is a bond for helping Chinese outbound travelers when they come from a very difficult situation like flight delays, flight cancellations, luggage lost and delayed flights of Chinese passengers a passenger ride is not of use. No one is aware that they were protected and even if they know, they don’t understand how to file for that. My job is to understand their difficulties and give them what they want and the solution is very easy. If the flight is delayed, the passenger just needs to come to our website travelright.cn and file their claim telling us what happened, and then they get their money back. So, the procedure is very simple. They delegate all the rights to us to talk to the airlines so they don’t need to handle the hassle by themselves and our business model is very interesting. We don’t charge anything until we get paid from the airline. So, passengers don’t need to take any risk. It is actually what we say is it is a minimal risk when you want to do a claim with the airline. A lot of passengers actually try by themselves because they want to get full compensation for the delayed flights of Chinese passengers, but finally, it comes back to us. So, I think the business is very interesting for Chinese outbound travel to Europe. 

Matthieu David: Thanks for the clarification. Actually, I have got a sense initially when I read what you do. TravelRight would be an insurance company, but actually, I think it would be wrong to say that it is an insurance company. It’s about the defense of the consumer. It’s a company that actually helps consumers to apply their rights, to claim for their rights and claim for the money they can get back. So, what I understand is that people don’t have to subscribe to anything for your service. Are you taking a commission on what they get back or what is your business model? 

Sophie Sun: Yes, you are right. So, because we have partnered with insurance companies; that is why they give us a word or a tip. In this product today, we only charge the service fee when we win the case for delayed flights of Chinese passengers. The customer doesn’t have to register anything. 

Matthieu David: I see. So, what would be the way, how do you make money?

Sophie Sun: Yes, just a successful theme. Once a case wins, we charge 30% as our service fee; 30% of the entire compensation. So, for example, if there is a delayed flights of Chinese passengers and you file a claim. You don’t pay anything in advance and while we get money from, for example, Air France for your delay and we take 30% for us and we transfer the rest of the money. So, you are getting 70% without making any effort. 

Matthieu David: I see. I understand. So, who do you define as your clients? 

Sophie Sun: My clients obviously are passengers of delayed flights that do Chinese outbound travel to Europe.

Matthieu David: Okay so, the people who are paying for your service you consider people who are actually; you take the commission from your clients. The environment has a lot of players. You have OTAs, you have airlines (learn more on how Chinese airlines are reacting after the Covid-19 crisis), you have the insurance companies who are actually covering the cost, sometimes reimbursing others and that may be actually the companies you are contacting to get the money back. So, would you mind telling us a bit more about China’s travel ecosystem and how you work with this China’s travel ecosystem and the product? 

Sophie Sun: Sure, so as you know in the travel industry in China, it is totally different than outside of China. That is why a lot of European people; it can come to compete with us directly in the China market, easily. The reason why is the China’s travel ecosystem is different. First of all, from the user behavior we don’t book flight tickets directly with the airlines so often. More than 70% of flights were booked online by online travel agents’ websites as we call them OTA and today actually, we partner with OTA to find delayed customers and that is our B2B2C model and this model is very light landing. So, we don’t need to invest massively for the B2C market which is very, very difficult to target a delayed customer today in China. So, the B2B2C is a faster way to reach our passengers and so obviously the insurance, in the beginning, the insurance company will really be surprised by their solution because what if they compensate the customers once the flight is delayed? It is not a lot of money because so much delay happens in China and the compensation is obviously very little. So, in China, if you buy delay insurance, it’s costing you let’s say 30 China Yen up to 200 China Yen. 200 China Yen is mostly for the national delay and that money; if you are delayed and the delay condition is very high; like more than 4 hours delayed or 5 hours delay. You only get up to 600 Euro compensation. Compared to what you get finally and with all the conditions; it just encourages passengers to protect themselves by their delay insurance, but regardless of all those, delay insurance is super popular in China because Chinese passengers will allocate it by the market and a delay happens every day. So, they have a high chance to travel out with a delayed flight. So, they must buy insurance to protect them. So, every time while we are talking to the passengers, telling them we have a solution, getting your compensation, etc. The first question they ask is, “How much do I have to pay in advance?” I tell them, “No, you don’t need to pay in advance. We are under insurance” and they say, “Oh, I am surprised.” So that’s just to explain to you what the reaction is from the passengers or the players in the market. 

Matthieu David: With OTA; how are you incentivizing them? Are you sharing commission or it is an add-on for the client so they are happy to add you on their website ad talk about you and mention you? How is cooperation?

Sophie Sun: Basically, OTAs don’t want to disturb any passengers while the solution is not valuable. So, they want to minimize it and so they don’t disturb any of the people. They don’t push messages to everyone, of course. They are only targeting delayed flights of Chinese passengers and then they have a condition. Of course, we want to target more than 3 hours delay because when there is more than 3 hours delay, we have a higher chance to get compensation and the cancellation now, so there we will see in-depth if their flight is illegible or not and give them compensation for the online travel agent. So far, most of OTA didn’t ask for the money. The reason they cooperated with us was not for money, initially now so far. So, some OTA even never discusses compensation for their part while working with us. So, actually, I think Chinese OTAs have a huge competition between each other and they want to be a unique service offering and value-added service to their passengers in China’s travel ecosystem. I think that’s the reason why they work with us and plus, we have a double culture. See, both have an organization power and a proficiency. We are professional in terms of asking for compensation with the airlines and they all trust us by sending their customers to us because our customer service in travel is perfect.

Matthieu David: You say one of the first OTA you worked with is Ctrip. Would you mind sharing with us how you can work with such a huge company when you start your business if I am correct? Is it Ctrip?

Sophie Sun: Yes, well not only Ctrip. We worked actually working with most of the OTA so far, and the reason for this is…

Matthieu David: So, the ones we know are Ctrip, Sky Scanner; who else? 

Sophie Sun: Sky Scanner hasn’t worked with us yet. So, if anyone knows Sky Scanner, please reach out to us. I think we are mostly working with… yeah, local-based. Let me explain to you why. I understand a lot of people are curious about that. In China, first of all, every company start-up; because digitalized life didn’t really start like decades ago. It just started ten years ago. Every company is new and because we understand every business has a day one. So, we actually are very open to all the styles, and sometimes you know, when we have start-up’s we actually focus more on the customer needs because that is why a start-up exists. We have discovered new needs and that’s why large companies actually appreciate innovation (learn more about innovation trends in China) and their service-focused startup and we are just arrived at what do they want to partner with and that’s it. I mean, a European country like in France; the start-up needs to prepare for years and then be able to sign their large company like Expedia and as you know like Expedia, they of course… our industry in China; we also are the biggest in the air service and I don’t know other ones; probably very tiny and they also take a look into our service quality; how we handle the claims with other OTA in China’s travel ecosystem. So, a lot of check-ups by the big companies, but they are convinced about our service.

Matthieu David: I see. Does it mean that for every single city traveler whose flight is delayed; they would actually be suggested to contact you or your company? 

Sophie Sun: Not everyone. It is only for serious delayed flights of Chinese passengers or cancellations. So, those other customers really need us and we don’t want to disturb every passenger. When any passenger flies to Europe, they should be aware of this regulation. 

Matthieu David: Good. We understand your product. You are basically helping consumers to activate their own consumer rights in Europe in case of Delayed flights of Chinese passengers. You are focusing on Chinese outbound travel to Europe and specifically for Chinese travelers. Is that correct?

Sophie Sun: Yes, that’s correct.

Matthieu David: Talking about the size of the company; would you mind sharing a bit where you are in development in terms of teams, offices, revenues if you can share, number of clients? You started two years ago. You are not part of Chinaccelerator. We’ll talk about that later on, but what about the size of the company?

Sophie Sun: So, my company; we first registered in 2018 and that is the time… five months after I resigned from Alibaba in France (learn more on how Alibaba is conquering Europe) and so I was based in France before. So, the initial team was recruiting in France and we were just coming from Hong Kong also and then we registered this company in China once SOSE decided to invest in us. So, our team; we have two teams. One is in France and another one is in Shanghai and there is a team in Shanghai because of our OTA partnership so, we have most of the people here. We have airline relation teams to make sure all the claims get welcomed and communicated with the different airlines and both in China and also in the west of Asia because we didn’t only receive a claim from China. We also receive claims from Asia and we have our customer service team, obviously. Customer service; we don’t really recruit local Chinese. We actually recruit international Chinese. So, they both understand how to handle the claim and also talk to the client directly. So, they understand and they are mostly having experience traveling abroad and so they understand the pinpoint for Chinese outbound travel to Europe. So, also customers can trust them easily. Another team is we call it the BI team is Business Intelligence and the Business Intelligence team is very important in our business because once we handle like if we hand 20 clients per day, it doesn’t require a lot of automation and data support, but once we handle more than 200 per day; then that’s something like really we need to focus our automation on and other data analysis, data support is very important for our industry. So, my BD team is only me. So, they don’t call me the CEO of the company. They call me a BD. I think since I was working for Alibaba so, I understand what is the big company needs, who they trust to work with, what type of partners they are searching for if they want to work on these surveys and so I think it is perfect to understand their situation and their concerns. That is why I can let them trust us and move the first one.

Matthieu David: So far, how many clients have you helped get a claim back?

Sophie Sun: We can’t disclose these numbers because we signed obviously there is a large hand that we don’t want to tell and it is not okay to tell because we signed an NDA for these parts. 

Matthieu David: Okay got it. How many do you estimate you could reach? What is the size of the market; the number of delayed flights with Chinese passengers or claims you could get? Do you have an idea of that?

Sophie Sun: So, obviously that’s something we need to verify in day one as entrepreneurs. So, we have a team that do Chinese outbound travel to Europe and there are 1.5-2% of flights that are seriously delayed or cancelled and since between China and Europe, it is mostly in line with up to 600 Euro compensation. So, the market is actually quite big, but we need to target the right passengers because it is not every Chinese that’s going to fly to Europe. China is big and yeah; the number in China is… let’s say it’s the same number as in Spain or in Italy because we are entitled to a bigger compensation if the number of travelers is large enough and later since we can potentially be the other OTA relation such as the South Korea market and Japan market and putting South Korea and Japan market together is actually possibly half of the China market. It is quite big and also Taiwan and Hong Kong are very interesting for us.  

Matthieu David: And it’s a growing market. The thing is that the numbers from China are still lower than they were saying in the beginning, but it is growing fast. It’s slow compared to the population, compared to the US. The penetration rate of traveling has… the activity is still low in China, but growing rapidly and certainly is one of the biggest markets in the coming decade. So, we talked about the product. Now, we know what you do, we know how you do it as well and we understand your business is B2B2C as you said. You go through intermediaries; you get it from the user which is using your service and gets 70% of the claim and you keep 30%. I’d like to talk more about how you discovered this opportunity? You said you were in France at the time, but how did you dig in and find out that that was something you could do and it would be relevant to do? We’re talking about Europe now. Bank one as a lawyer, for instance, to understand all of this. How did it come to you? 

Sophie Sun: Yes, so I was a big traveler and I love to travel and I think the travel experience for me is the most important in my life. I want to protect it and I want to keep it pleasant and less hassle. I think it’s for my personal hobby and interest it makes 100% sense to me to work in China’s travel ecosystem. I saw a lot of things and I since I am a Chinese living abroad, I understand what a Chinese feels when they travel outside of China and what they really need and they always make me think about, “I need to go for a better startup to help people solve their pain points.” So, why Chinese outbound travel to Europe is because I was living there and I understand the ecosystem there. I can build a partnership easily there. I think while I was working at Alibaba actually, there is an interesting story. We have a lot of Chinese people traveling to Paris and everyone has a different story and I think the most hazard that is happening is air travel and lost luggage, delayed flights of Chinese passengers, cancellation of the bookings; all those are really disturbing people and it can destroy the entire journey. That’s why I think working and I was working for an Airbus project before. So, for the air business, I don’t think it is like a mystery for me. For the air business, it is very simple. We understand how they operate, how the airline operates, what is the most important thing for them etc. So, for me solving the pinpointing in air travel is quite interesting. So, all putting things together and then one day while my friend told me, “Hey Sophie, I’m thinking about one idea for a very long time.” He presented an idea to me is that there is an idea in our company, actually. I mean 60% is for like our business and then I check the competition and I talk to the OTA’s and I say, “Okay there is a market. Let’s do that” and so, that’s why our product is number one and it doesn’t mean we will stop here because I think since the Chinese outbound travel base is huge. It’s like one hundred and we have thirteen million in travel to Europe, but that is only 15% of entire flights of outbound travelers and we want to protect every passenger; their rights and we want to not only compliment them after or help them with their flight delay or cancellation. We want to change or re-schedule and we want to also help them handle their luggage hassle and those are really important for a traveler. Let’s say this is just a… in China this is just for that number one and we believe it’s amazing what we can do together with OTAs to help Chinese travellers travel with a better experience thus improving Chinese outbound travel to Europe.

Matthieu David: I see so, I understand that you have a lot of people coming from Alibaba and you found out that they were very annoyed by the delays, loss of luggage and so on and other travel that you knew you could get paid back part of it and you saw there was an opportunity. I get that. You said that you worked for Alibaba for more than 3 years. I looked at your LinkedIn profile. I found out there was like two years and in France, you had been one of the first to join Alibaba in France now which is quite well established and gets a lot of visibility. What did you learn at Alibaba that helped you to start your business? I am asking you that because I have seen so many people with a profile to write Facebook headlines ex-Alibaba or ex-Google and I am always wondering how and why is working in such a company such a statement; as much as getting a degree, as much as it is defining yourself because people use it to define themselves on LinkedIn. So, what did you learn at Alibaba which could now define yourself and change yourself to start this business?

Sophie Sun: Yes, so people gain different things from different experiences. No matter who Alibaba was and who I worked with and which lawyer I worked with; I think if you understand what you want to get, which value you want to contribute and with those objectives, people can learn better than a lot of people. So, people’s learning skills are different. I believe you agree with me and that’s why I met with you today. See, Alibaba is valuable and they taught me, it is a cultural difference and a huge difference. So, I think still Alibaba is not the best example to go abroad. Facebook is western culture. Amazon; yes, but not Alibaba yet. The reason is that the Chinese culture is very strong. We have uni-culture and that culture doesn’t seem to really work very well with European culture and another thing that I found out is that China is big enough to make Alibaba grow very focused on China. They are just the focus in China. Internal needs are already huge. So, for them like going outside of China… for me, it is not really something essential. Well, others make like Alibaba’s decisions. Ours is very unique to any other country. I see the pain points and I learn from that and I said, “I want to build a company that is different” and the culture (learn about the corporate culture in Chinese and MNCs) should be really international. That’s why I think I built a team in France. I recruit mostly Chinese people and why I built a team in Shanghai is because I recruit mostly western minded workers. My team is very international today and the culture let’s say we can both recruit in Chinese locally. We have a Chinese customer service lady who didn’t speak very well English in the beginning and finally, she got along very well with the people in the team. So, I think we have done very well. By learning from Alibaba, I will have the culture and it is really important in the business or in our day one and the second thing I learned is no matter the company; how big it is, how powerful it is. They need to understand local needs. So, local needs mean, when you want to serve people from France, how, why, what do they need? I think if you have never lived there, you will never understand. So, putting yourself in the shoes of the travelers; international travelers in the different countries is really important.  

Matthieu David: So, what I understand now is that what you learned from Alibaba is that culture is actually a sizeable part of the business. So, it is a sizeable reason why you may fail or succeed in business or you may have the idea and play well with the idea; the initial idea. What you did say opened my eyes to a couple of things. I was always surprised at how people who are not technical developers would write on their LinkedIn profile ex-Google or ex-Facebook which are companies where people would find our technical people, but what they may have learned is a culture of innovation, which makes them different or like a new degree. So, give me an understanding of why people may state so much on their profile; the company they have been working with and it is especially big on Google, Facebook, Alibaba and I’d like to talk about your funding. You joined Chinaccelerator one year ago; soon one year ago. I think it’s like 9 or 10 months now and you got money from SOSV which is managed by William Bao. How does it work with Chinaccelerator and SOSV? Could you tell us more?

Sophie Sun: Okay yeah. So, first of all, my company wasn’t like especially searching for funding because we already established a big partnership in China, and obviously funding for us, isn’t a difficult subject, but we don’t necessarily need to take the money. Still, I believe founders who would be able to end their Taiwan’s team salary will be the most important sole leaders and sole foundation of the company. There are so many start-ups that need funding; continuous funding. So, founders who are working full time for funding to survive. We are not in this situation and that’s why the investors who joined us love this. So, William Bao who is the boss of SOSV in China. He liked our idea and my way to do business in Taiwan and that’s why the deal is very easy to close. The reason why we choose them, is also I can see not only because we have a huge amount of work, but it’s also because the organization of SOSV and Chinaccelerator in China are very well organized. They actually have a lot of history of servicing different start-up’s in different fields and they have strong partnerships with large companies. I think, all in all, we really built good collaboration with them and so the program is a 6-month program. Let’s say a 3-month intensive program and then another 3 months come actually earlier to stay with them to understand how they work. So, I am actually a founder who has really arrived to stay in the same office as them, even before the batch starts. We are on batch 16. When batch 15 was still there I was already in the office and brought my desk and by that time I had just moved from Paris to Shanghai and I am a lawyer and I need to find a team. Even they were servicing for their batch 15. My papers still had to still be finalized with their team. They started to help me out. I think it’s a team that is really generous to help. They do whatever they can. They understand the start-up pinpoint. They saw so many examples. So, we can avoid a lot of stupid mistakes by listening or taking their advice. Also, I think they have a luncheon every Friday with us with different founders and key members of the team. Sometimes I ask my intern to join me. So, we understand how to work with them. So, SOSV actually helped us a lot, not only helping me kick off the business but also to give me some advice as a team leader; how to train a team and also, more importantly, manage financially the risk. So, my company on day one, I actually have a founder who really saved a lot of money for the company. They keep a low bill rate in order to survive when there is a situation turning very bad. So, for example, today I was grateful for what we have realized in day one. We actually really are caring for each cent, how we spend and who we recruit and the team is also very aware of the situation today and that’s why we can go through a difficult situation together and I don’t know how long it will take for the Coronavirus to be cleared. Since China Chinese outbound travel to Europe is totally interrupted. I guess it will take at least 3 months to recover. 

Matthieu David: Yes, so for people who are listening to us, later in the year we are recording today, 18 March 2020, and Europe has banned any travel; the European Union as from today. So, I believe this is impacting what you are doing because you are specifically working with Chinese outbound travel to Europe. The ban will last for one month. 

Sophie Sun: I don’t think in one month we will recover. As you can see, the extension. China has managed the Coronavirus very well. It still takes us a month and a half or let’s say 2 months because it’s still continuing and it will take longer than that and that’s why I think the situation in Wuhan and Italy; probably the next step would be the US that would be really, really horrible. We are worried about that because we are exactly in that business. So, I’m a person that really hopes that Europe can manage well otherwise we can only wait and see, but I believe we are not the only ones who are worrying. No matter Chinese companies and you know, it is for the entire China’s travel ecosystem together.    

Matthieu David: I think a topic that is really useful to learn from currently is the topic of crisis management. Every entrepreneur is facing a crisis. Every big company can be facing a current crisis and how to react to it and how to manage it. What is your take on that? How do you react and how do you manage it?

Sophie Sun: Yeah, actually before I started this business my fear or worry is bigger than the reality and then the Coronavirus happened. So, my company was running very well no matter from the different perspectives. We have small problems, but I fix them immediately and make us a little bit stronger each time we fix problems, but this time it is different. This time it is the industry that is interrupted. So, I think under these situations that are really special… so first of all challenge number one was the working distance and while we have a working distance, we have to deliver the project like a new website and we started. I was scheduled to start a partnership with Ctrip like just 1 February. The 1 February was off. So, all those things after February this year, it is the most important month in my life in TravelRight and under so many expectations. We were expecting them to come and we prepared and finally, we have to work from home and all these things happened. We were in shock in the beginning, but immediately we realized how important it is to be united at this moment because each team realized, “Okay, we are a small team” so everyone’s performance will affect business. So, I think this sense of responsibility under the stress, we started to train ourselves to work distancing in high efficiency. So, we succeeded with the work and even now like I didn’t realize the difference between working in the office and in distance and my team will start office work, obviously tomorrow. They will be all in the office. I just returned from France since last week so I need to stay 14 days in my apartment.    

Matthieu David: We are in the same situation. 

Sophie Sun: And another thing is we actually deliver good products. Let’s say if you can check our new website and compare it with our previous website; the user experience… maybe you didn’t go to our previous version so we improved ours, but regardless of distance work. So, my top leader speaks Chinese but lives a New Zealand citizen, and his team is based in Shanghai. Fortunately, we are almost working in the same time zone. So, that’s in distance work and the other challenges are you know; we promised some people to be promoted. When the crisis happened a lot of companies actually fired people. They have no choice if they want to survive, but I had to keep my promise because my team; every one for me is precious and everyone carries importance. I don’t want to miss anyone in this crisis. On day one, the Coronavirus happened and we don’t know how long it will last, but obviously at least a month and a half. So, my estimation for China is accurate. We do promote our team. We realized our promise and some of the key members to let them join us you know; a founding partner and some of them join the talent pool. So, I really managed well the employees and the crisis and the founders insisted on doing the same which was good for the team and it really cheered up a lot of people in the team. On the other hand, we have to face a reality since Europe starts to have the Coronavirus and we realize the crisis is longer than we think. So, at this moment I trust my team who also understands the situation and is willing to do temporary sacrifices in terms of their revenue in order to let the company survive. So, I think the founder needs to understand to give and take. This is very Chinese and also, I think it is a very universal philosophy. Another thing is I was grateful for insisting on global rates in the company. So, we don’t recruit…. If we can manage with one person, we do not recruit two. We only increase the number of workers when the volume really comes in. So, I am not so aggressive which is right because even before the Coronavirus the Chinese economy was slowing down and other venture capitals (read our latest article on the venture capital market in China) started investing in most of the start-ups, especially in an early stage. So, those are the things I learned and we were insisting to do the same thing, but I think now we have the capacity within the team to make a change. It’s really important. Last week during our weekly meeting, the entire team was talking about how we bring a new avenue to the company. Every person gave one or two points to think about that and I found that my team has a lot of ideas; how to pivot, to bring extra revenue, and I really appreciate that. It seems that making a change is not only me. It is the entire team together. So that is why yesterday I wrote on my WeChat, “If your cash is not enough to support you for the coming 8 months” the entire team has to make a change together and that change is not only about a company change., it is also a personal avenue change, organization change and why do you need to standby and waste the situation? It is not just the company in the situation and then you can maybe re-join the company again. So, a lot of things could have happened and we can only make the choice. Do not be afraid to talk about your fear to the team because if you don’t talk about it now and one day you realize in the last moment that you are going to hurt someone and I think sometimes we need to let people know in advance; a psychological preparation. I am not being very negative. Actually, that’s the only way to save the company or to survive and survival will be the one to welcome the next up because life has ups and down’s also. So, why stop? If you can survive, you will be the person to welcome the up. So that’s what I wanted to say. 

Matthieu David: Yeah thanks for sharing your management of the crisis. What I understand is that your focus was on the team to make sure there was a team positiveness and you stand together and the second move was; which is very interesting is what kind of pivot we can do and make sure everyone is comfortable with a pivot on the product. So, you actually followed a typical crisis management program, which is to make sure that everyone is on board first and secondly, to see what can be added to the product to the current situation. It’s very interesting feedback that you gave to us. In the documents you sent to us talking about the team, you say that you are running a daily debrief meeting. Would you mind sharing a bit more about your management style? A daily debrief meeting looks very much like what entrepreneurial organizations and books are teaching entrepreneurs. So, would you mind sharing more about your principle of management?

Sophie Sun: Yes, so every person joining the team, I tell them… most of them are young people. So, I was a really lucky person to receive western-style management in day one of my careers. So, I was allocated by the western side management style, but I grew up in the Chinese… or let’s say my family is running a business so I have seen since I was young. I understand my mom allocating me and how she ran her business was very tough, but it is very real. So, I understand both the Chinese management style and the European management style, but compared to the styles; personally, I think we need to take those good styles. Let’s say western management style is mostly my company’s conduct. So, internal organization, a communication tool, we use western sides and partnerships, spirits, contribution, united when the situation is difficult. That is very Chinese because I think that on the western side, people are very self-protective. They protect themselves. They have a reason for doing that, but in China, we try to focus on the bigger picture and sometimes we sacrifice while it is necessary, but finally, will everybody do the same thing? A situation can change quickly to a positive situation and then I think we need to take it both sides. So, under the partnership, I really like the Chinese on my side. So, the region where I grew up is where Alibaba was born, where all the suppliers for Alibaba were born.  

Matthieu David: Where are you from?

Sophie Sun: Taisho. So, we are like one hour and a half drive away and so, in my region, every business was running by the family and the staff is zero which means family putting money together to support their relatives to run their business and they trust that person and probably he is the most intelligent and hard worker. During the day time, you are a boss, but during the evening time, you are sleeping on the floor. 

Matthieu David: Yes, for people listening to us, who may not know the difference between the different provinces, Zhejiang is on the east coast and very commercially dynamic and Wenzhou which has a very huge boo ha in France, particularly, but all over the world and they are known in China for being business people and indeed, there is this saying that I would prefer to sleep on the floor than to work for someone else. That is the mindset of the people living in Zhejiang and Wenzhou because Wenzhou is very well-known as a city of small to medium entrepreneurs in China. Is that correct? 

Sophie Sun: Yes, Wenzhou is very special. Wenzhou really supports entrepreneurship. Zhejiang still has a lot of corporate life and they want to be abroad and no matter if they qualify or not. It doesn’t matter. Running a small business like opening a restaurant is even better than any corporate life. So, they were thinking of this side. The western region less, but we are very reasoned. We are kind of aversive for the entrepreneur, but we don’t really overdo it. What I want to say is like I am not the type of person who wants to take too much risk because risk; if it is manageable you should take it. So, for me, which means they want actually the news why TravelRight is insisting on lowering the bill rate. We know the money comes as a trust from the other people, my investor is my best friend and they not only understand my business but also understand me. So, I am a very lucky person to have very good investors on board and I hope I can insist on doing the same thing so that our entire organization’s funding can run in a healthy way. A lot of founders are hiring or talking to investors. Talking to investors can take the entire day and that will make rouble of yourself. So, I would rather be modest and welcome fewer investors instead of welcoming all investors. We are very cautious about that.  

Matthieu David: We talked about the identity of coming from those provinces, but there is another identity you are mentioning in interviews and papers you have shared with us and this is to be a female entrepreneur in China. My feeling is that if there is a country where you can express yourself as a woman and an entrepreneur it is China because China has the highest number of a woman or female billionaires and it seems that it is has been the case for many years or decades that female entrepreneurs in China are part of the economic life and high positions, but what is your take on this? Do you feel the same as I do or do you feel China still has progress to make? 

Sophie Sun: Matthieu, you understand China very well. I can see that. True, female entrepreneur in China is something. It is popular and I met a lot of female entrepreneurs in China. In Shanghai, we have a lady who supports all the ladies in the tech industry and actually, William Bao and the lady who does the events. William in believing in the female entrepreneurs in China; he is an example to invest in a woman. I think supporting a woman is that we don’t feel such huge differences between males and females. So, that is a basic understanding. In family life, the woman takes leadership. In the big cities, that is normal is that local culture; the woman takes leadership. I will tell you why and probably I can find some clues for you. A lot of language schools (learn more about China’s language schools market) back to my university life it was a woman who started English majors and French majors and so, women are good at foreign language and foreign companies recruit people who speak good languages. So, they are recruiting mostly women, and women learn very openly about their culture. They are very sensitive to culture. You can see that the Chinese woman stays in Paris more than most. So, all these things make women learn the western culture very quickly and once you understand the culture better and you know how to deal with the people and you take the lead. So, you can see that in a lot of big companies., So, women leadership in foreign companies; they have woman leadership that is super strong. 

Matthieu David: That would be the last question on this topic. I feel you have spoken a lot about it. I’d like to dig a bit more. As far as I understand there are two kinds of feminism. One feminism is and I don’t know if you like the word ‘feminism’, but there are two kinds of what we call feminism. One is to say, “Male and female are the same.” So, you would need to treat them the same way. There is no difference. Another kind of feminism is to say, “Men and women are different.” We are biologically different, so we have to be treated differently, but equally. So, to have access to equal opportunities and so on in our differences because at some point, women and men may have different constraints in life which could be biological and all that, but he has to be respected and valued in the same way. What kind of feminism do you believe most China is in because again, the place of women in business has been one of the obvious successes of the development of China, but what kind of feminism it is? Is it that male and female are the same; the exact same way or male and female are different, but we make sure we have access to similar opportunities? 

Sophie Sun: Oh yeah, I think another thing about that; before you ask me this question because rarely in China people ask, “Is a man and woman the same?” Your father loves you. Your parents love you and your sister more or your brother more. So, it is kind of a very remote question in China, but I do ask it a lot as a female entrepreneur in China. I am curious, probably. There is a woman who wants to catch up to me and say, “You should understand them.” I think China asks the question last today because they are almost equal, I guess. I am away for 7 years in China, probably it was not what I saw today. Maybe one year later you give me another interview and I will talk differently, but so far, I feel that woman entrepreneurs in China are mostly supported. So also, I think both men and women should access of course equal opportunities in different industries. It is encouraging the ladies in the tech business, in the tech field which is good, I think. People are different and we cannot only divide the woman and the men. All people are different so, they have different skills and we shouldn’t say, “Okay in legal teams or in tech teams, I need to recruit a man more than a woman”, but from my company, I found out that men and women are equal (learn more on gender equality at work in China). They are all excellent, but I tend to and it’s like it’s not just me that makes the choice. We all just want to recruit the best people ever, who fit with the team, who are motivated and that is very important because skills can be trained, but motivation we cannot change easily. So, always we pick the people who are most motivated. 

Matthieu David: My feeling is that China is more in the family zen of ‘we are the same’ and male and female should be treated the same as in the western countries; Europe and the US may be more in the second feminism, I feel which is to say, “We need to do positive action for women because they are not elected enough in politics so we force to choose one male and one female all the time to be elected” or we push them to have access to certain things by creating regulations. That’s why I’m all the more surprised at how it has advanced and has been successful in China Simon De Bovoar, The Second Sex book is famous and well known in China. That has been one of the surprises when I arrive in China 10 years ago when I was picking this team, how popular and well known and respected she was for her feminism. So, yeah. Thanks for joining us. It was very interesting. We are talking about a time that is very challenging for you and very challenging for other people and a lot of countries and companies. As entrepreneurs, we all believe that it will all be back on track soon. Hopefully within 2 or 3 months and I wish everyone is staying safe.

Sophie Sun: Thank you, Matthieu, for the interview. I am happy to talk with you and share my experience. Hopefully, we can have another interview after the crisis is finished. I hope you are staying safe with your team. 

Matthieu David: Stay safe everyone. Thanks for listening. Bye-bye, everyone. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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This article China Paradigm transcript #95: How one company leverages delays of Chinese outbound travel to Europe is the first one to appear on Daxue Consulting - Market Research China.

China is the world’s largest outbound travel market in both the number of tourists and spending. Drivers of China’s rising outbound travel market include rising incomes, relaxed travel visas, increased global awareness, easier access to travel information online, and more international airlines. Outbound travel is, of course, the driver of Chinese duty-free consumption. This report explains how duty-free shops, both in China and overseas, can reach Chinese travelers.

[Data Source: chyxx.com, Chinese Duty-Free Consumption report by daxue consulting, growing number of Chinese outbound trips]

Popular destinations of Chinese outbound tourism

South-East Asian and East Asian countries are the first choice for Chinese outbound tourists. Top destinations are Thailand, Japan and Vietnam. The choice of these destinations is due to the geographical proximity to China and the ease of obtaining a visa.

[Data Source: Analysys& National Tourism Administration in different countries, Chinese Duty-Free Consumption report by daxue consulting, top outbound destinations for Chinese tourists]

Key trends of Chinese outbound tourism

The rapid growth of outbound tourists continues to drive Chinese duty-free consumption, but the per capita single-consumption amount has not changed significantly. Besides, due to the opening of new airline routes and the general increase in consumption capacity, non-first-tier cities have become major growth engines. In terms of age distribution of tourists, the growth is concentrated on those born between 1950 -1970, and 1990 -2010. More and more Chinese travelers are interested in both shopping and new experiences. Restaurants, museums and special performances are key projects for outbound travel.

Outbound tourism expenses

Due to the rising purchasing power of the middle classes, Chinese consumers’ spending on outbound tourism has been the world’s No.1 for 7 years and the number is still increasing. Regardless of tourism destinations, Chinese often spend a large part of total travel expense on cultural activities, accommodation, and shopping.

[Data Source: UNWTO, Chinese Duty-Free Consumption report by daxue consulting, China’s growing expenses on outbound tourism]

When asked about favorite shopping destinations during travel, more than 60% of Chinese outbound tourists prefer duty-free shops, as have assured quality at a cheaper price. Retailers around the world focus on Chinese customers because of their strong purchasing power. For example, in South Korea, Chinese duty-free consumption accounted for 83.4 billion RMB on duty free goods in 2018. This accounts for 73.4% of the total sales of duty-free stores in the nation.

[Data Source: McKinsey & Company, Nielsen, Chinese Duty-Free Consumption report by daxue consulting, duty-free stores are the most preferable channel for Chinese tourists]

Global duty-free sales

Due to an increasing number of travelers and rising spend per person, Asia Pacific region drives most the global growth of duty-free sales. In emerging countries such as India and China, Chinese middle-class consumers have the spending capacity to promote the growth of the duty-free industry in the global market.

[Data Source: Tax Free World Association, Generation research, Chinese Duty-Free Consumption report by daxue consulting, growth of duty-free sales in APAC]

Global duty-free sales in different channels

Due to the high volume of passengers, good maintenance and having a wide variety of brands and products, airport shops account for the largest amount of global sales. Downtown shops and border shops had realized significant increase in sales with the continuous expansion of shops in urban areas.

[Data Source: Statista, Chinese Duty-Free Consumption report by daxue consulting, airports take a lead as duty-free channel]

Inbound duty-free market in China

Due to policy support in recent years, China’s inbound duty-free shopping is now competing with South Korea’s dominant position. Offshore duty-free shops grew quickly during the last few years with the relaxation of restrictions and the increased number of product categories.

COVID-19 hits the Chinese tourism industry

The damage to the Chinese tourism industry because of outbreak is equivalent to a loss of 1 trillion RMB GDP. Many travel enterprises estimated the ongoing shutdown costs the industry about ¥17.8 billion every day.

[Data Source: Tai Media APP, Sina Finance, Chinese Duty-Free Consumption report by daxue consulting, decreasing domestic trips due to COVID-19]

Only 2% Chinese tourism related companies felt that they had not been significantly affected after the COVID-19 outbreak. Coronavirus impact on tourism in China especially visible among travel agents, hotels, and retailers (related to tourism). 

Chinese tourists contribute to the tourism industry in many countries. For instance, in 2018, Chinese tourists represent more than 70% total tourism in Hong Kong and Macao, similarly, more than 25% total tourism in Thailand, Japan, Vietnam and Korea. The impact on the economies of these countries will likely rebound in the second half of 2020.

[Data Source: Press reports; McKinsey Global Institute; Pengpai News, Chinese Duty-Free Consumption report by daxue consulting]

Coronavirus impact on tourism in China opened the opportunities for new online approach in this sphere. During the COVID-19 outbreak, many scenic areas and museums used live-stream to increase exposure and attract tourists, which attracted a lot of traffic. Even after the outbreak, the live-stream still can be watched by elderly and people with disabilities, and can be used as a preview before travel.

Short-term and long-term coronavirus impact on tourism in China

[Data Source: TravelDaily, Chinese Duty-Free Consumption report by daxue consulting]

Key Characteristics of Chinese Outbound Tourists

Chinese outbound tourists demographics

Those born in the 90s and 80s make the majority of overseas tourists. They are, on average, highly influenced by social media and they usually plan carefully to find value-for-money trip sand shopping. These Chinese tourists pay attention to both quality and price, they like customized activities and products offered by local stores.

[Data Source: Analysys & National Tourism Administration in different countries. China Tourism Academy, Chinese Duty-Free Consumption report by daxue consulting, majority of Chinese outbound tourists are young people]

Most Chinese outbound tourists come from tier-1 and tier-2 cities (provincial capital cities), over half are female. Most are also upper middle-income citizens who are willing to spend money while traveling to seek high-quality experiences.

[Data Source: Analysys & National Tourism Administration in different countries. China Tourism Academy, Chinese Duty-Free Consumption report by daxue consulting]

Chinese Duty-free consumption: The most popular duty-free goods

Skin care and beauty products are the most popular goods in duty-free shops. Women are the most important consumers, since the top selling products are women’s products. In addition, Chinese tourists tend to buy famous wine and wrist watches. Many Chinese tourists research duty-free products before purchase by reviewing online recommendations. Even after they arrive at their destinations, Chinese travelers will continue to research about duty-free goods. Brands can reach Chinese tourists by launching their own Chinese websites and apps. This allows consumers to shop anytime, anywhere, at their convenience.

Buying purpose of Chinese Duty-free consumption

When visiting duty-free stores, Chinese tourists of ten purchase duty-free goods for themselves or as gifts. A small percentage of Chinese duty-free consumption accounts for buying duty-free goods on behalf of others, such as Daigou, which is someone who buys goods from foreign markets and sells them back to consumers in mainland China. Many duty-free consumption behaviors among Chinese tourists are planned spending rather than impulse spending, they make plans based on the info from guides and comments on Chinese social media and travel websites.

[Data Source: PTRA, m1nd-set, Chinese Duty-Free Consumption report by daxue consulting]

Payment methods of Chinese overseas tourists

The payment methods of Chinese tourists vary by age and travel destinations. The post-70s and 80s Chinese tourists tend to use bank card payment during trips. For post-90s Chinese tourists, mobile payments make up a big proportion of their payment methods. Cash payment is used by all the generations of Chinese overseas travelers. They use bank cards more frequently in developed regions where credit cards are used more commonly, such as the USA. At destinations where tourists can easily connect to mainland China’s banking system, such as Hong Kong, Chinese tourists prefer mobile payment since it is convenient and a better way to keep track of spending.

[Data Source: Nielsen, Chinese Duty-Free Consumption report by daxue consulting]

How Can Brands Reach Chinese Outbound Tourists

Offer content that adapts to Chinese consumers

China outbound tourists generally choose to read travel recommendations before trips, and the most convenient way is to use popular media platforms that specialize in tourism and shopping, such as Weibo, WeChat public accounts, Mafengwo, etc. Those platforms normally provide accurate content by precisely targeting groups to permeate. Naturally, major brands choose to cooperate with these platforms to get them mention their products in articles in order to gain a high degree of attention.

Interact with consumers by delivering targeting brand campaigns

As competition intensifies among brands, companies nowadays innovate and differentiate themselves by delivering customer-centric campaigns in China, and experiences that give their target audience a compelling reason to become customers. As for duty-free brands, participating in similar duty-free shopping festivals can better interact with consumers and increase brand recognition in this field. For Chinese consumers, this kind of offline events make them have easy access to some foreign luxury brands that are not easily available in mainland China.

Provide more duty-free exclusives

Since Chinese outbound travelers purchase ahead of the Chinese New Year period and other holidays, travel retail exclusives are key purchase drivers at those time period. Also, “uniqueness of products or services” is one of the most impactful factors among duty-free shoppers. Duty-free stores offer some famous Chinese brands with lower price, compare with domestic stores, like Moutai. Because of the export tax rebate policy (exported goods pay less tax), Moutai in duty-free shops is much cheaper than the same product in domestic shops, which attracted many Chinese overseas tourists who like Baijiu (白酒).

[Data Source: daxue consulting, Special selection Moutai in duty-free market]

Cooperate with mobile e-commerce to reach traveling consumers

By cooperating with a mobile e-commerce platform like GlobuyX, duty-free brands can settle in mobile e-commerce to expand their promotion channels and connect with Chinese consumers. Globuy launched a WeChat mini-program that allows duty-free brands to exposure advertisements, duty-free goods discovery and pre-orders, WeChat menu links and exclusive benefits. Through this kind of cooperation, brands can reinforce their awareness and branding, achieve the purpose of communicating brand events and products with consumers and increase footprint and exposure online and offline in China.

[Data Source: GlobuyX mini-program, Chinese Duty-Free Consumption report by daxue consulting]

KOL Marketing to reach Chinese duty-free consumers

With the strong development of KOLs in China, consumers will now hold a wait-and-see attitude and buy products after KOLs. Therefore, some high-end duty-free brands choose to cooperate with KOL to increase their sales. According to Weibo data, the number of discussions on the Sanya Duty-Free’s Night in reached 30,000 times, and the number of likes exceeded 5,000. During Sanya’s Duty-Free Night, they successfully attracted a large number of fans by holding meet-and-greets with fans for major KOLs, including cosmetics, fashion, etc. When KOLs interacted with fans (take pictures, signature, etc.), they also recommended products to them.

How Duty-Free Shops Can Attract More Chinese Outbound Tourists

Global competitive landscape of travel retailers

The global duty-free and travel retail market is highly fragmented, and the market is dominated by non-Chinese brands.

Chinese Duty-free consumption: Business overview of Dufry

DufryAG, from Switzerland, is the world’s largest duty-free retailer with over 2,300 shops in 65 countries. The combination of organic growth and M&A enabled continuous high growth of Dufry.

[Data Source: The Global Travel Retailer 2019, Chinese Duty-Free Consumption report by daxue consulting]

Dufry’s digitalization strategy

Dufry aims to be present at every stage of the whole Chinese customer journey. By using digital and technology innovation, it is enabled to improve consumers’ shopping experience and provide personal tailored services. Travel loyalty program combining shopping and travel benefits.
 

After one year of membership, average purchase frequency increased 80% and the average spending increased 131%, comparing to the data collected one year before the membership. Dufry has virtual lipstick testing technology in the store, customers can change the color with a tap of the screen.  The strategy engages customers during in-store shopping experiences.

Dufry’s pre-order service for Chinese consumers

Dufry’s “reserve & collect” website allows consumers to pre-order duty-free goods online, then pick up and pay for Hong Kong’s offline stores. The website had 5,570 visits in November 2019. The service adopted Chinese consumers’ demands for convenience and preferential price.

Chinese Duty-free consumption: Overview of the China duty-free Group (CDFG)(中国免税集团)

As a state-owned duty-free company, China duty-free Group (CDFG) has realized high-speed development in recent years with powerful support from the Chinese government. The company has started to step into the global market, although it focuses on China’s domestic market.

[Data Source: chyxx.com, Chinese Duty-Free Consumption report by daxue consulting]

CDFG’s new travel retail strategy

Utilize digital technology to enhance connection with consumers. For example, in 2018, CDFG built a membership big data platform that helped the company have better understanding on their customers. Then, personalized service can be offered to ensure better shopping experience.

[Data Source: tfwa.com, Chinese Duty-Free Consumption report by daxue consulting]

CDFG’s strategic cooperation with Alibaba

In November 2018, CDFG officially built strategic partnership with Alibaba Group to expand the retail market in China. The cooperation focuses on areas including e-commerce, big data and logistics, aiming at establishing a new tourism ecosystem. The partnership allowed CDFG to use Alibaba’s digital tools and e-commerce platforms to optimize offline duty-free shopping and improve its logistic efficiency. According to the agreement, consumers can use Alipay in CDFG’s offline duty-free stores. As one of the merchants on ‘Fliggy buy’ (the global shopping channel on Fliggy, platform owned by Alibaba), CDFG can provide its products and content to attract Chinese consumers.
Powerful support from Alibaba group ensure CDFG better performance on digitalization and have access to more consumers’ information.

CDFG’s social media strategy

In addition to KOL collaborations, CDFG also leveraged live-stream promotions. The live-stream focused on skincare and cosmetics demonstrations. Also, it picked some popular brands to introduce price, size, discount, etc. by interviewing salespeople. Many Chinese consumers favor this kind of videos that share in-store experience. Audience members who share the video can have a chance by lucky draw to receive Guerlain’s perfume for free. This attracted much attention from Chinese customers and received 3.67 million views on social media.  

The upgraded strategies of duty-free retailers

As in the case with many offer industries, digitalization offers great opportunity to the duty-free and travel retail industry. For duty-free retailers, digital technologies are tools that can build a travel retail ecosystem. By working closely with brands, airports, airlines, etc., data can be integrated to obtain a complete view of the customer journey and buying behaviors. Therefore, duty-free shops and travel retailers are enabled to provide superior customer experience and establish loyalty programs. By integrating online and offline channels, travel retailers are able to further increase personalized communication with customers at home, during their whole journey, and when they are at the airport.

Chinese traveling shoppers usually learn about duty-free products from shopping related content and other people’s comments on Chinese social media platforms. Understanding and adapting to the needs of Chinese tourists is critical. Chinese consumers have different shopping habits from other countries’ tourists. Duty-free retailers should have content and promotion activities that precisely target different types of Chinese consumers.

Key Takeaways

China’s travelers are increasingly sophisticated. The Chinese millennials (born in the 80s and 90s) are sophisticated, price sensitive, and usually search on social media and travel websites before tourism and purchase. They seek high value, unique and exclusive products during their trips.

Experience is as important as price. Chinese overseas travelers value unique experiences. Innovative store design, engaging customer service, targeting emotional connections and flexible payment methods can bring better shopping experience to Chinese duty-free consumers.

Reach consumers ahead of time and optimize convenience. Most Chinese tourists plan their duty-free purchases ahead of time. Brands and duty-free shops promote products by allowing pre-orders, remote fulfillment and mobile payments. This helps Chinese consumers move purchases from being impulse to planned, and reduce ‘inconvenience’ as a barrier of shopping.

Attracting Chinese consumers by exclusive deals. Many Chinese tourists want to buy products they cannot find in China. Duty-free stores can drive demand by having a greater array of limited-edition products, value packs, and duty-free exclusives.

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The Coronavirus China Economic Impact report covers the spread of the outbreak in China, what industries are growing and which industries are severely impacted. We also zoom in on the economies of Wuhan and Hubei, as well as Coronavirus impacts on the global supply chain. Lastly we share how the Chinese government is reducing the burden on enterprises. Our Coronavirus China Economic Impact report is available for free to anyone seeking to understand the COVID-19 outbreak’s effect on businesses in China.

This report is routinely updated and contains everything businesses need to know about the economic impact of the Coronavirus in China. It is a collection of research from many respected firms and organizations combined with our own careful analysis.

Overview of COVID-19 spread in China

Coronaviruses are common causes of respiratory infections. They have previously been implicated in viral outbreaks, including SARS-CoV and MERS-CoV, but are also responsible for some common colds. From the perspective of virus evolution, COVID-2019 is more advanced type than its two predecessors. It has never been found in humans before.

How COVID-19 starting during the Lunar new year affected spread

The 2020 Spring Festival migration started on January 10 and ended on February 18. The estimated number of people who have had contact with confirmed cases gradually increased at beginning of the Lunar new year and stabilized until the end of it. That’s because flow of people participating in the Spring Festival Transport is very large, which makes the chance of cross infection increase and directly lead to the peak of the epidemic. Government restrictions on the flow of people helped to reduce the spread of the virus by decreasing contact and increasing physical distance between those who have COVID-19 and those who do not. However, within China, the confirmed cases have flattened since February 13.

How long will the coronavirus last in China?

As of early March, the number of infections in China continues to decline, with the exception of Hubei, the infection in all regions seems to be controlled. As long as no new infections appear during the duration of a full incubation period, then the epidemic can be considered to be officially over. Currently, the rate of infection is minimized by the quarantine efforts and shutting down of workplaces and public places.

What is the Coronavirus economic impact in China

Do we need to worry about the impact of coronavirus on GDP?

According to chief economist from Zhongtai Securities and Donghyun Park from Asian Development Bank, the coronavirus economic impact in China is expected to be between 1.5% and 2% in terms of GDP growth, which will not change the long-term trend of China’s economy. The epidemic has a large impact on the economic growth rate in the first quarter, or negatively affects the GDP growth rate of about 2%-3%. However, as the virus continues to spread globally, there will be many more factors to include in the coronavirus economic impact on China including global demand of Chinese goods and commodities. The largest economic impact comes from the service sector, especially the catering, transportation, hotel, tourism, and accommodation industries.

Up close on the economies of Wuhan & Hubei

The huge outbreak in Hubei province contributed a lot to coronavirus economic impact in China, as it is the most developed province in the central region of China with 3.9 trillion RMB GDP in 2018. Hubei has a large number of industrial clusters in R&D and manufacturing, such as automobile and electronics.

According to government work report of Wuhan in 2019, electronic information, bio-technology and new medical and medical appliance, and the automobile industry are the three pillars of the manufacturing industry. 

Hubei province is an important part of the global supply chain. It accounts for 9% of total Chinese auto production. German engineering firm Bosch, the world’s largest auto component manufacturer, has dozens of factories in China 2 of them are in Wuhan. Hubei also plays a significant role in the global supply chain of critical electronics components. The province is the production base of Taiwan’s PCB factories, including Taiwan Optoelectronics, Xinxing, Jianding, Nanzi Electric, and Dingying.  Industry insiders pointed out that PCB is the “mother of the electronics industry” and is an indispensable key component of all electronic products. If the PCB factory in Taiwan and the Hubei factory are obstructed, it will affect the global electronics industry.  

Hubei contributes much to the progress of the chemical industry. It is the largest province of chemical fertilizer in China, its output has reached to 596.56 tons in the first three quarters of 2019, which increased 19% compared to last year. Hubei has a high production capacity of sub industries including the phosphorus chemical industry, pesticide industry, and the vitamin industry.

COVID-19 affects industries in Hubei

Coronavirus impact on supply chain in China can be also seen in some industries in Hubei.

Electronics industry

After Wuhan postponed production of electronics, China’s supply chain of critical electronics components is facing a catastrophic disruption. About 70% of the world’s smartphones has been affected. According to Strategy Analytics, overall shipments of phones will reduce by 2% in 2020, some consultants believe that COVID-19 will cause demand side decrease. Besides, the first quarter is normally off-season of China‘s semiconductor industry, COVID-19 may further dampen the sales of semiconductors.

Automotive industry

China auto sales fell 2.8% in 2019 amidst global trade tensions, the first decline in nearly two decades, which also affect Hubei auto sales because Hubei province account for 9% of total Chinese auto production. Global automakers forecasted further sales decline in 2020, prior to knowledge of the coronavirus outbreak.

COVID-19 China economic impact: online industry growing

Due to the coronavirus epidemic, Chinese daily life goes online. For example, gaming industry experienced an unprecedented growth. While the Chinese mobile gaming industry is stimulated by the coronavirus, the development of 5G is expected to accentuate the trend and support the growth of the industry.

Coronavirus economic impact in China is also observed in short video platforms sphere. Between January 20 and February 2, 574 accounts on the short video platforms Douyin and Kuaishou each gained between 100k-500k new followers. The Coronavirus is accelerating the shift towards live-streaming, which already exploded in 2018, with a 745% growth year on year, thanks to improved connectivity and video maturity. The short video sector recorded 569 million daily active users in the post-holiday period, far exceeding 492 million on a regular daily basis.

E-commerce purchases during the Coronavirus outbreak in China

During the Chinese New Year in 2020, people were likely to purchase medical products, hygiene products and food online. To support the new growing online demand, more than 35,000 jobs were created across China from the following online retailers: Hema, Suning Xiaodian, Meicai, JD Logistics, JD daojia, and Dada.

Studying and working go online during coronavirus outbreak

Most companies have set-up remote work policies to avoid contamination at work. Hence, Enterprise Collaboration Apps facilitated remote working for 200 million Chinese workers after the Chinese New Year. To keep in touch, they use apps produced by two China’s online-giants: Alibaba and Tencent. During the outbreak, Alibaba’s Ding Talk skyrocketed to the very top of the App Store in a few days while Tencent Meeting and WeChat Work are in the second and fifth position, respectively.

The Coronavirus outbreak does not stop Chinese students from studying. Universities across the country organize online lectures to ensure the safety of their students. They rely on QQ, a Tencent streaming platform to carry out online teaching. The downloads of some education apps such as Tencent Classroom, and China University Mooc experience a significant increase. However, unlike fitness and co-working apps, the online education peak during the coronavirus may not last after the epidemic, with the return of students back to school.

Coronavirus impact on tourism in China

The damage to the Chinese tourism industry because of outbreak is equivalent to a loss of 1 trillion RMB GDP. Many travel enterprises estimated the ongoing shutdown costs the industry about ¥17.8 billion every day.

Only 2% Chinese tourism related companies felt that they had not been significantly affected after the COVID-19 outbreak. Coronavirus impact on tourism in China especially visible among travel agents, hotels, and retailers (related to tourism), as they badly need sales revenue during the epidemic. 

Chinese tourists contribute to the tourism industry in many countries. For instance, in 2018, Chinese tourists represent more than 70% total tourism in Hong Kong and Macao, similarly, more than 25% total tourism in Thailand, Japan, Vietnam and Korea. The impact on the economies of these countries will be catastrophic, if the coronavirus outbreak lasts for three to six months.

Coronavirus impact on tourism in China opened the opportunities for new online approach in this sphere. During the COVID-19 outbreak, many scenic areas and museums used live-stream to increase exposure and attract tourists, which attracted a lot of traffic. Even after the outbreak, the live-stream still can be watched by elderly and people with disabilities, it also can be used as a preview before travel.

Short-term and long-term coronavirus impact on tourism in China

Coronavirus impact on the food and beverages industry

Although many restaurants in China strengthened their delivery safety during the outbreak in China, food delivery alone is not enough to keep their profits in the positive. The Chinese New Year is usually a hot season for the F&B industry, the total revenue of Chinese restaurants in 2019 CNY has reached 724.1 billion RMB (occupied 15.5% of the whole revenue in 2019). Because of the Coronavirus outbreak, large catering brands have to reduce expense to balance their finance, such as permanently shut down some offline stores and redundancies. Many small restaurants are facing with the risk of bankrupt, since they have very fragile anti-risk capability. Many Chinese restaurants (around 62%) could not get rent reduction and they still need purchase epidemic prevention products, such as protective facemasks and thermometers.

Currently, many restaurants try to focus on delivery to get some profits, but actually revenue of online food delivery business is much less their normal business.

In order to manage the losses, some restaurants sell food materials to consumers and communities at low price and provide free food to medical staff and government units in epidemic areas. From 1^st February 2020, many restaurants temporarily lend employees to Hema (盒马鲜生) which relieved their labor costs. At the same time, KFC launched a contactless delivery service on food ordering platforms, such as Meituan (美团). Because of a lack of funds, some restaurants tried to seek investments and loans. For instance, Pudong bank offered 120 million RMB loans to Xibei (西贝) restaurant. The large food ordering platform Meituan (美团) worked with banks to finance some restaurants.

Coronavirus impact on supply chain in China: what businesses can expect

How Coronavirus will impact the Global Supply Chain by Mid-March

Most Chinese manufacturing slowly started resuming operations at the end of February, but the delays could have a devastating impact on the global supply chain.  For most companies, the inventory in stock will is enough to keep up with demand for two to five weeks. Shipping by sea to either the U.S. or Europe can take around 30 days. This implies that if Chinese plants stopped manufacturing prior to the beginning of the Chinese holiday on January 25, the last of their shipments arrived the last week of February. If lead time from China is shorter than 30 days, the disruption occurs earlier. This is already the case with Hyundai which announced on February 14^th the suspension of its production lines from its plants in Korea.

Assessing the coronavirus impact on supply chain in China, the electronics industry seems to be more affected. Intermediate products, which produced in China, are deeply integrated in the global technology supply chain.

Operations are concentrated near the affected areas (~290 of about 800 plants named in Apple’s global supplier list are located in regions that have delayed returning to work). Overall, 84% of manufacturers are concerned about delays related to the outbreak.  As the components are often heavily customized, it is challenging for factories to relocate outside of China in the short term.  

COVID-19 economic impact on Chinese manufacturing

As Chinese government shut down Wuhan and delayed the returning to work, many factories have to face the huge losses, limited supply chain and insufficient raw materials. Labor-intensive manufacturers (such as textile, clothing and plastic products) are significantly impacted, small and medium-size factories are worst-hit areas.

According to Morgan Stanley’s report in mid-February, Chinese production had only reached 30% to 50% percent of the usual levels. However, health and medicine related products have a huge demand during the COVID-19 outbreak.

Mask manufacturing demand

After the COVID-19 outbreak, the demand of masks has risen rapidly. Although many companies have started cross-border production, the shortage of raw materials could not be resolved in the short term. China contributes 50% of global mask production. Mask related manufacturers will benefit during the period, however most believe that it is a short-term demand. Expanding production would result in oversupply after the outbreak recession.

China is getting back to work

The week after 9^th February is the time for migrant workers to return to work, small and medium-sized enterprises need to resume production to boost cash flow.

Manufacturing learning points from COVID-19

Although epidemic outbreak is a black swan event in the manufacturing industry, it is likely that COVID-19 China economic impact will be positive. For example, it will promote manufacturing enterprises to strengthen the management of employees’ health and safety. The leaders of manufacturing companies will pay more attention to intelligent manufacturing. Due to online working, manufacturing enterprises will demand software such as task management, project management, and workflow management for remote collaboration. The Coronavirus economic impact in China will also be seen in science industry and smart technologies industry.

Coronavirus economic impact in China: what should exporters to China know

COVID-19 to impact China’s trading partners

After a slowdown in 2016, China’s imports and exports grew despite the trade war. Due to manufacturing and supply chain shortages during the epidemic, this growth rate is expected to slow down. A rebound in export activities may take place in April, while import activities would slow down until July. China’s top trading partners will suffer from the impact of the coronavirus on the main Chinese export products such as computers, broadcasting equipment, integrated circuits, and smartphones.

Coronavirus impact on supply chain in China is expressed in slowing shipments across the country, making transport routes congested. Currently, overall trucking supply resumed operation at around 60% and is a bit higher in the Southern areas of China. Overall intercontinental rail capacity has recovered to 60%.

How to improve supply chain during the epidemic

Government response to soften the Coronavirus economic impact in China

Policy support from the Chinese government

Production stop, isolation of staff and transportation restriction were a consequence of coronavirus China economic impact. Policy support and costs reduction are desperately needed. The Chinese local governments released some polices to relieve this situation, such as financial support of small businesses, flexible employment policies, social insurance, rent subsidy and tax concessions.

Long-term economic impact of the Coronavirus in China

The epidemic further boosted digitalization

During the epidemic, both the number of users and the time spent online had a dramatic increase. The total mobile Internet traffic increased by 36.4% compared with 2019 CNY. The number of daily active mobile shoppers grew by 14.6% during the 2020 CNY compared with 2019 CNY. In the meantime, some traditionally offline industries have turned to e-commerce to relieve losses.

Coronavirus China economic impact on the luxury market

COVID-19 is a downturn to the global luxury market. In Shanghai, Beijing, Shenzhen, Guangzhou and Wuhan, the passenger flow in large shopping malls and luxury brands stores declined more than 80% during the 2020 CNY. Also, due to the COVID-19, most Chinese consumers are more focus on healthy and rational consumption, many luxury products buyers plan to spend less on luxury goods, more on medical products and necessities. When COVID-19 is under control, this trend may still continue so long as the economy is impacted and until consumer confidence returns.

Coronavirus economic impact in China: big data innovation

During the epidemic, more than 20 provinces’ governments worked with technology companies to build “epidemic prevention system”.  The reports helped to see related data, epidemic feedback, quickly find and isolate suspected cases. The cooperation between government and big data platforms is promoting the practical application of big data in public crisis management and driving more technology innovation. Along with the development of the epidemic, more Chinese people are getting used to using big data tools in their daily lives, which speed up the process of digital life. 

Coronavirus economic impact in China: AI developments

The epidemic promoted the actual use of artificial intelligence products in medical and public safety areas. For example, in order to improve the efficiency of the diagnosis for COVID-19, Beijing Haidian hospital is using an AI assisted diagnosis system that can process 300 chest X-ray in 10 seconds. Many consumers fear the coronavirus cast a shadow over the food delivery industry. Therefore, JD launched autonomous delivery robots to reduce human-to-human contact during the Coronavirus outbreak. Besides, AI medical robots have started to work in Wuhan’s hospitals, they help doctors and nurses with disinfection, cleaning and delivering medicine.

Coronavirus China economic impact: financial assets may surpass fixed assets

Due to the COVID-19 outbreak, most Chinese people have to stay at home, real estate transactions are almost completely frozen. However, financial assets are not limited by places, the bond market has been very active since the Chinese New Year. The Chinese people have more time to invest bank financing products and bonds. Besides, growing savings may increase the demand for investments with stable income, such as bank financing and bond funds.

View our Coronavirus China economic impact report on slideshare:

This article Coronavirus China Economic Impact Report by daxue consulting is the first one to appear on Daxue Consulting - Market Research China.

Events such as The Harbin Ice Festival and Snow Festival are helping push up demand in China’s winter apparel market. Attracting a larger number of tourists yearly, the festival requires tourists from regions farther south to invest in winter apparel, even if just to be worn once.

Preparation for Beijing 2022 Olympics boosts winter sports market in China

In light of the upcoming Winter Olympics Game, this market is worth examining so as to better understand what benefits it holds for foreign companies. Some companies stand to benefit handsomely from the combination of upcoming events and current socioeconomic trends in China.  Some of these trends include the Chinese youths’ increasing fixation on luxury sports, winter scenery tourism, Chinese government support for winter sports participation and of course the 2022 Winter Olympics.

[This scene of the construction site of the Olympics Winter Village in Zhangjiakou is a sure sign that China is taking preparations for the games seriously. Zhangjiakou, located in Hebei just outside of Beijing, is poised to become a new mecca of  winter sports tourism in China. Source – Greg Baker / AFP]

How the 2022 Winter Olympics may increase spending on winter apparel in China

In 2008, China took to the limelight by hosting the Summer Olympics in Beijing. Now China is preparing to appear in the spotlight again as it prepares for the 2022 Winter Olympics. Scheduled to take place in Beijing and nearby Hebei Province, the winter games already have the world watching China.

Since the games are expected to attract hundreds of thousands of visitors from around the world and within China, the potential to increase interest in winter sports among visitors is high. Perhaps in conjunction with the Chinese government support, the 2022 Winter Olympics have begun to increase spending on winter sports and on winter apparel. For example, total visits to ski facilities in China has grown nearly fourfold since 2006 and this trend is likely to continue post-games.

In the lead up to the Olympic Games in 2022, it is likely that these trends will intensify. As with other Olympic Games, it is likely that there will be lasting impacts on the Chinese winter apparel market well after the games. Foreign companies that have not yet considered the effects of the Olympics on this market would do well to assess their potential benefits.   

[Shown in the graph is the steady increase in visits to domestic skiing facilities within China. Source – EUSME & China-Britain Business Council]

Trends in luxury sports will bolster growth in China’s winter apparel market

Trends across China catch on fast, sometimes spreading like wildfire. Notably examples are the tourism trend of daka (going to a tourist destination simply to take a unique photo, usually in imitation of a celebrity,) bike-sharing platforms such as Mobike or Qingju and the ubiquity of mobile pay. One trend gaining traction that has such potential to grow fast is the popularity of luxury sports in China. Foreign companies looking to profit from this emerging trend may look to China’s winter apparel market as a place to start.

Skiing and snowboarding in China are growing

The growth of luxury sports can be captured in statistics showing the increase in snowboard sales, which grew by more than 20% in 2016. While most reports on this topic highlight the robust growth in snowboarding, especially among younger consumers, it is also worth noting that skiing is still growing steadily, with annual growth near 10%. As both of these growth rates are faster than China’s overall GDP growth, it can be said that markets for snowboarding and skiing are performing well in China.

As skiing is considered a luxury sport and usually requires the purchase of expensive equipment, the market has the potential too. A report published by EUSCME shows that the Chinese skiing market alone is expected to grow from €600 million to €3.5 billion between 2016 and 2022.

The popularity of luxury sports in China combined with other factors will bolster increased demand not only on domestic skiing facilities and services, but also on winter apparel.

[Snow-covered mountains across China provide an excellent setting for the growth of China’s winter apparel market. Shown in the photo is Hailuo Gou National Park in Western Sichuan, an up and coming place in China’s domestic winter scene tourism market. Source – 睿睿]

Winter scenery tourism in China is becoming more popular

As Chinese consumers become wealthier, their appetite to visit tourist destinations domestically and internationally grows more and more voracious. Due to the astounding growth in disposable income in China over the past few decades, trips to these types of destinations have exploded. In 1984 there were only 5,000 annual visitors to Jiuzhaigou National Park in northern Sichuan. By 2002 however there were over 1 million annual visitors to the park.

Popular winter scenery tourism destinations in China include Hailuogou and Jiuzhaigou in Sichuan Province, Xueli Mei Mountain in Yunnan and of course snow and ice festivals in the Northwest. In addition to these well-established winter scenery destinations, a few others are in development, such as Bipenggou and Miyaluo scenic parks, also in western Sichuan.

The staggering increase of Chinese tourists visiting these sorts of tourist destinations has increased the demand for winter apparel sales and is likely to continue doing so as China’s middle class continues to grow.

[This promotional advertisement shows the government’s ambitions to increase interest and participation in winter sports, notably skiing in Shaanxi Province in this case. Source – 竞报体育整理]

The Chinese government supports winter sports

In combination with these other factors, the growth of China’s winter apparel market is being driven by none other than the Chinese government. Perhaps in conjunction with policies to increase China’s participation in football, Chinese government support for winter sports is most likely aimed at increasing China’s rankings in high-profile international games. That being said however, there is great potential for this government support to directly benefit foreign companies.

The government’s support for winter sports in China is manifesting itself in a few different ways, but most notably through policies, infrastructure and programs. Policies that will encourage the growth of this market include preferential tax and financial policies aimed at developing the winter sports market in China. In addition to the physical construction of winter sporting infrastructure, the government has also taken measures to set aside land for winter sports through land use and zoning policies. Finally, the government has created various programs that stand to increase the size of the winter apparel market, notably educational and youth programs that are designed to raise interest in winter sports among children.

Regional level governments support winter sport facilities in China

In addition to these ambitious national-level goals, regional governments have been pushing their own agenda in increasing the size of the market, such as in Jilin Province, where the provincial government has been working to construct world-class winter sports facilities.

Since the Chinese government has such a strong mandate and almost always achieves its goals, government support in these three categories is very likely to push up interest, participation and spending in winter sports and winter apparel by Chinese consumers. Foreign companies should take note.

[Screenshots of the oversized effect Internet celebrities have on markets in China, in this case the winter apparel and winter sports market in China.  Source – Taoabo]

What is the takeaway for foreign companies in regards to China’s winter apparel market?

With China’s increasingly important presence in international events and media, now is a crucial time for foreign companies to look at new and promising markets within China. As multiple studies have shown, the demand for winter sports apparel in China has reached a liftoff point as China’s middle class has come of age. Despite being slow to the game of market share, China’s winter apparel market has the potential for strong growth during the next decade.

The takeaway for foreign companies is that the 2022 Winter Olympics in Beijing will increase sales of winter apparel and winter sports equipment not only leading up to the games, but also for years to come following the event. In addition, winter sports expositions in China will complement the Olympic Games by increasing interest in winter sports in other socioeconomic groups. Next, the growth of winter scenery tourism in conjunction with the growth of the Chinese middle class was and will continue to be a sustaining drive in the demand for winter apparel in China. Most importantly, the trend of winter sports being seen as a luxury sport by Chinese youth is going to be a boon to this market as Chinese consumers continue to enjoy higher levels of disposable income.

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Question:

• What is the new service ‘Ctrip point of interest’?

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[Source: Daxue consulting “Number of outbound trips from China”]

Most tourists travelling overseas buy travel insurance since they face a number of potential risks, especially when they are not familiar with the local culture and language. In the event of an accident, illness or unanticipated incidents, it can be difficult to find assistance or seek compensation. Tourists travelling within China face similar issues. However, many Chinese consumers have a sense of security about domestic tourism, they show less demand for travel insurance during domestic travel. Insurance companies need more publicity for travel insurance to enhance the safety awareness of Chinese tourists.

What does travel insurance in China include?

The main risks Chinese tourists face are personal injury, loss of property, flight delays, flight cancellations, lost baggage, hotel orders canceled, traffic accidents and disasters. Therefore, the travel insurance market in China has a large variety of products covering a variety of services including destinations, travel agencies, guides, tickets, transportation, hotels, etc. Among those risks, flight delays, disasters, lost baggage and property are the most frequent, the insurance target those risks are favored broadly by tourists. In the first half year of 2019, more than 40% of the claims of travel insurance in China were related to flight delays, since many airlines do not compensate for delays and cancellations if they are caused by external reasons like weather. Other than flight delays insurance, property loss (stolen or robbed) insurance is also necessary, especially for the Chinese tourists in Europe. In 2019, among all travel insurance claims related to the property loss (stolen or robbed) of Chinese tourists, about 20% happened in Europe.

What are the factors that influence sales of travel insurance in China?

The premiums and sales of travel insurance are highly affected by tourism season and holidays in China. Travel insurance usually enter the selling season during the New Year’s Day, the Spring Festival, May Day, National Holiday, winter and summer vacation. Secondly, the transportation tools used by travellers also have an impact on the sales of travel insurance. Tourists who travel by airplanes, bus and private cars are more willing to have travel insurance than people use other transportation methods. Policy and regulations about tourism are important factors. For example, every tourist must have insurance when they submitting application materials of short-term visa for the Schengen region. Travel insurance is also compulsory for traveling to Taiwan. Destination distance is also a key factor for consumers. Tourists who choose long-distance tourism often show stronger demands for travel insurance, and the security condition of destinations is significant factors as well. Most Chinese people are easily convinced of the need to purchase travel insurance after hearing of other tourists who had accidents while traveling in those regions.

Where do consumers buy travel insurance in China?

Travel agencies and insurance companies are traditional purchase channels for tourists, however, most consumers become habituated to use mobile apps and online tourism platforms (such as Ctrip 携程) to obtain information and buy travel insurance. On those platforms, travel insurance is treated as the value-added service of tourism and tickets, which largely simplified the purchase process of those insurance products.

[Source: vacations.ctrip.com “the travel insurance products for Chinese tourists”]

In addition, a considerable number of insurance companies have been trying to sell travel insurance through WeChat public accounts and mini-programs. However, some of Chinese tourists prefer to travel independently and they show less trust in travel insurance purchased online. Insurance companies need to develop more distribution channels for travel insurance in order to reach the diverse Chinese consumer base.

Leading players in the travel insurance market in China

PINGAN (中国平安) presence in China

[Source: baoxian.pingan.com “domestic and overseas travel insurance for the Chinese tourists”]

PINGAN is one of the largest domestic insurance companies in China. The travel insurance of PINGAN is divided into domestic and overseas tourism and includes both group travel and independent tourism. PINGAN’s domestic travel insurance mainly covers the risks of disasters, high-stakes sports, accidental injuries/death, medical treatment, property and luggage loss, the insurance also offers emergency rescue services and reasonable expenses for emergency situations (such as funeral and family visits). For the overseas travel insurance of PINGAN, it focuses on trip cancellation/delays, visa refusing and tickets loss other than personal injuries and property loss. PINGAN offers travel insurance targets on road trips, plateau areas and different regions, such as Europe, North America and Australia.

In order to offer better after-sales service, PINGAN developed online channels to provide quick claim settlement. The company encourages consumers to use simple three steps on PINGAN mobile app and WeChat account (scanning QR code) to get compensation in a very short time after they had accidents or disease.

Allianz (安联保险) presence in China

[Source: allianz360.com “global travel insurance for Chinese tourisms”]

As a globally famous financial service company, Allianz entered the China’s insurance market in 2003 and built partnership with JD (京东) to be a joint venture company in China. By working with JD, Allianz effectively expanded its online sales channels to benefit from China’s booming e-commerce market. The travel insurance products of Allianz cover different kinds of accidents, medical treatments, luggage, personal property, visa, flight delays and road rescue. Allianz launched the “digital first” strategy in China to make use of the huge mobile network, the company created a mobile app to digitalize the process of insurance purchasing and customize insurance products for consumers. Besides, consumers can implement self-service claims by using the WeChat account of Allianz. Through those strategies, Allianz provided superior quality service to the Chinese consumers and expended its market in China.

AIG (美亚保险) presence in China

AIG insurance belongs to the American International Group and it is one of the largest wholly foreign-owned insurance companies in China. The company provides travel insurance to more than 1 million Chinese consumers every year. In 2017, the total premium of AIG insurance reached 1.6 billion RMB in China. The company localized in China by building seven branches in Shanghai, Beijing, Shenzhen, Guangdong, Jiangsu and Zhejiang. The travel insurance products of AIG target overseas tourism, domestic tourism, road trips and island tourism. In order to adapt the Chinese tourism market, AIG also launched distinctive insurance products, such as insurance products target on smartphones and outdoor activities like surfing, skiing, diving, etc.

The potential opportunities of the travel insurance market in China

Customized tourism is becoming more popular in China, along with independent tourism and niche destination tourism. Chinese tourists are also trying more dangerous activities while traveling, such as bungee jumping, paragliding, and surfing. These types of activities often require insurance packages to cover any risk of injury. As more travel that is adventurous becomes more popular among Chinese tourists, creating more opportunities to enter the travel insurance market in China.

Children and seniors have strong demands for travel insurance. Tourism is one of the most popular leisure activities for the Chinese senior citizens, in fact, seniors make up more than 20% of China’s tourists every year. However, there are not many travel insurance products targeting seniors, and single insurance products are unable to adapt to the diverse needs of consumers. As the number of travelers from and within China will very likely continue to increase, insurers should seize the opportunity to increase their market share by developing new products and identifying new customers groups, and making travel insurance more easily accessible.

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“Customized travel in the Chinese tourism market is unique in that it is characterized by its popularity, youthfulness, and high growth rates.”

– COTRI director Prof. Dr. Wolfgang Georg Arltstated

Growing demand for private tours for Chinese tourists

Customized tours are trips with personalized itineraries. This provides tourists with flexibility catering to specific interests and individual needs. In the Chinese tourism market, high-end customized tourism is aimed at clients with relatively high disposable income who can afford such expensive services.

According to the report published jointly by China’s online tourism giant Ctrip and China Outbound Tourism Research Institute (COTRI), “Customized Travels of Chinese Visitors to Europe”, the number of private tours for Chinese tourists to European countries has increased by 130% and made up 10% of the whole outbound customized travels. China’s customized tourism market is fast-growing and shows huge potential.

2019 Chinese travel consumptions trends

With the growing number of tourists traveling abroad, customized travels for Chinese tourists are actively developing. One of the goals is to prevent overcrowding, especially during holidays. According to the Hurun Report, around 3.9 million families in China have assets worth more than RMB 6 million, and 1.6 million households have more than RMB 10 million. Besides, a growing number of high-income groups in China are delighted to spend money on outbound tourism because they believe overseas travel experience is a vital contributor to improve life quality and happiness.

Based on the report, China’s high-net-worth individuals totaled 1.67 million in 2018. These travelers are ready to spend a generous budget for tourism. Professional service and individual approach are the most valued drivers in the high-end tourism market in China.

For those Chinese tourists with more disposable income, the uniqueness of a travel experience is prioritized over cost savings. The following data demonstrates the sequence of decisive factors for Chinese tourists. Beauty and uniqueness of tourist attractions (56%) are most important to high-net-worth Chinese tourists, the next factor is safety (47%) and then ease of visa procedures (45%). Relatively less important factors are friendliness of local people (35%) and affordability (34%).

Following the demand, many travel agencies now offer private tours for Chinese tourists. As a popular online tourism company, Ctrip launched its “high-end customized travel platform 3.0” to promote the development of the high-end tourism market in China.

Ctrip organizes private tours for Chinese visitors

Ctrip can now organize customized private tours for Chinese tourists. Its customized services take significant share in China’s customized tourism market, by upgrading facilities, such as flight tickets booking, accommodation reservations, route arrangement, exclusive car service, Chinese speaking tour guide, etc.

 Specifically, Ctrip’s platform also works on arranging experiential activities to contribute to the high-end customized tourism of Chinese travelers, such as study tours to prestigious universities, honeymoon packages to watch aurora borealis or visit hot spring, wedding tours, and mock marriage ceremonies, local food tours, etc.

The main target audience of high-end customized tourism in China is 35-50-year-olds due to the higher consumption level. High-end tourists aged over 46 years old account for nearly 60% of the long-distance customized travel. And most of them choose to travel with partners and families. As for younger tourists, they prefer to have shorter trips because their time for vacation is more limited. Thus, private tours for Chinese tourists also need to offer age-appropriate services. This is one of the big challenges shaping this industry.

The high-end travel agency, HHtravel’s report shows that the high-end customer groups have a strong willingness to travel to South America, Northern Europe, Africa, Russia, Australia, Canada, Maldives, Japan, and Southeast Asia.

In order to follow the consumption trends of Chinese high-net-worth individuals,  Ctrip’s high-end customized travel platform 3.0: HHtravel, has developed various tourism projects. For example, travelers can choose to ride a speedboat across the Horizontal Waterfalls in Australia; dine under stars at a camp on the Savannah in Kenya; run a Marathon or watch the NBA finals. Aiming to meet the diverse needs of Chinese visitors, all these activities can be adjusted with clients’ individualization.

Rethinking the classic Chinese tourism market

There are two ways to travel in the current Chinese tourism market: Fully independent travelers (FITs) and Modular outbound travelers (MOTs).

As a traditional way for Chinese visitors to travel abroad, travel packages offered to MOTs are mainly covering tourist landmarks and include coerced shopping in a fixed itinerary. The travel expenses are pre-fixed with the agency, but hidden costs of optional activities often come up. Such group tours usually have tight schedules at a lower price, due to the larger number of destinations to visit at one time.

Currently, a number of Chinese traveling as FITs is growing because of the flexibility and freedom it offers. The penetration of global information online also made it easier for FITs to use mobile apps to receive local information on the tourist destinations before and during the trip. However, the experience of FIT is insufficient to be applied for everyone and can also be time-consuming.

The classic travel agencies in the Chinese tourism market contain separate service types for FITs and MOTs. The former travelers usually choose travel agencies to help them book flight tickets and accommodations, because the cooperation between airlines and local hotels with travel agencies can bring discounts. Apart from this, the main business and profit of travel agencies rely on groups tours. MOTs only need to follow schedules pre-arranged by the agency. However, one problem remains: agencies have often force travelers to do more shopping and activities to earn commission.

Chinese travelers no longer believe that the meaning of tourism is simply to meet with their relatives and friends living abroad, go shopping, or eat fast food. Currently, Chinese travelers pay more attention to local cultural and natural experiences. Hence it is considering as an emerging approach to provide new and authentic offers to private tours for Chinese tourists.

Process of customizing private tours for Chinese tourists

Because customized travels of Chinese visitors is becoming a hot topic and the demand is fast-developing, many travel agencies modify their original journey packages narrowing down group tours to small groups or offering business travel groups. While prices have been greatly increased, the service quality has not been improved significantly. It means that there is a big market potential and room for development.

Customized travels for Chinese high-net-worth individuals should focus on the top-notch quality services and the exclusive use of highly scarce resources. This kind of butler services for customers include the ability to solve all problems that occur during the journey and make a real-time adaptation. Service providers in the travel planning stage follow this process:

For a subsequent journey, the customized services should always keep in touch with customers to follow their status and care their feelings.

Customized travels of Chinese visitors: The sophisticated future of high-end tourism

According to the COO of Ctrip, Mr. Ming Guo, with the advancement of technology, the future development of the high-end tourism market in China will offer more online services to make the traveling process more scalable. There are multiple online resources of touristic information which are easy to be accessed. Combined with the database, the algorithm of machine learning will be more precise to match travelers with personalized needs. As machine learning becomes stronger and more powerful, it would be used to meet the customers’ expectations.

Business opportunities for international companies

According to COTRI’s forecast, the number of Chinese outbound tourists will reach 4 million in 2030. Based on the fast and impressive market growth rate, Ctrip predicts China’s customized tourism market will increase by 200% in the next three years.

Undoubtedly, the development of the high-end tourism market in China, along with the increase in customers will bring higher profits to tourism companies. It will also expand the public’s interest and return on investment in terms of tourism resources. For those touristy cities that want to further increase the share of the tourism market, it is crucial to provide tourists with personalized tours.

For international companies, to develop high-end tourism market in China, it is necessary to combine advantages of local tourism resources and cooperate with well-known tourism companies in China, in particular, with the online service of individual trips.

In addition to research China’s customized tourism market and build local travel database, international companies can also take advantage of educational resources for expertise and training professionals.

Building a reputation among China’s customized tourism market will be a focus for China’s travel agencies as they compete for more share in the growing market segment. Thus, tourism companies that provide the highest quality of services have every chance of becoming leaders in the Chinese tourism market.

Transformation of China’s tourism market with COVID-19: Consumption trends

Outbound tourism has declined as the world is gradually affected by the pandemic. With the coronavirus under control in China, short trips within the country have been popular, particularly road trips. According to a consumer survey, confidence in domestic travel rose by 60% in first two weeks of May with the top three destinations in 2020 being Shanghai, Guangzhou, and Beijing, all of which are reachable by car or train.   

Following the crisis, the younger generation is more willing than the elderly to travel. On Tomb Sweeping Day in April, 60% of the people who booked trips were under the age of 30, which is a huge surge from 43% in the same period last year. According to a report by China Tourism Academy, more than 43 million domestic tourism visits were made within China during the Tomb Sweeping break, generating 1.1 billion USD.

Author: Yufeng GUO

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The domestic Tourism Market in China

In 2017, the domestic tourism market in China hosted five billion visitors, and a significant number of them opted to visit marine and wildlife parks. For example, more than 31,000 tourists visited the Qingdao Haichang Polar Ocean World in 2017, up 64% from the year before. Chimelong Ocean Kingdom saw a 40% increase in attendance between 2014 and 2016. Larger facilities such as the Beijing Zoo can see up to 6 million visitors per year.

Baidu search index: Zoos in China

Users on Chinese search engine Baidu search for “zoo” (动物园) an average of 1840 times per day. Searches spike during national holidays such as the spring festival, golden week, or May 1^st. Average daily searches have increased by 21% since 2011.

Baidu search index: Aquariums in China

“Aquarium” is a less popular search term on Baidu than “zoo.” Baidu users search for “aquarium” (水族馆) an average of 582 times per day. Search frequency has increased by 13% since 2011.

Increasing searches on Baidu for zoos and aquariums in China reflect a growing consumer interest in this type of theme park, especially during holidays and periods of nice weather.

Marine Parks and Aquariums in China

More than 60 marine parks are currently operational in China, ranging from large scale developments to add-ons at larger theme parks. Between 2015 and 2017, ocean theme parks operating throughout China experienced a 20% hike in attendance. There are more than 36 large-scale projects set to launch in the next two years.

Looking beyond domestic projects, park operators like Haichang Ocean Park Holdings plan to capitalize on the industry trend and build marine parks along the beltway of countries making up China’s silk road trade initiative. The company is in discussion with several Chinese-owned infrastructure builders to develop three to four ocean parks along the silk road in countries like Bangladesh and Madagascar. Haichang will also embark on an “asset light” strategy of designing and operating resorts for state-backed companies.

Haichang aims to become the world’s largest marine theme park operator following the opening of three new projects in Shanghai, Zhengzhou, and Sanya. Their newly-opened Ocean Park in Shanghai is expected to attract at least 3 million visitors per year. The mega theme park, which cost RMB 3 billion to build, covers more than 190,000 square meters and features 12 exhibition halls, 4 interactive experience zones, and 3 cinemas. Customer spending at the ocean park is about 250 RMB per person, including entrance fees and souvenir purchases. Haichang posted net profits of USD 8.83 million in the first half of 2017, up 38.9% from the previous year.

Poaching and animal mistreatment in China’s Marine Parks

The marine park industry’s growth in China comes with a dangerous demand for threatened or endangered aquatic species. There are currently no government regulations or standards regarding animal trade in China, and no government agency has a clear regulatory responsibility over the illegal trade of endangered wildlife. This has created dire animal welfare conditions and a dangerous gray area of immunity for poachers. Lucio Conti, vice-president for marine facilities at Atlantis Sanya, notes worrying that fisherman in coastal cities can often provide interested parties with any aquatic animal they desire, endangered or not.

China is the main driver of the captive marine mammal industry globally. Since 2014, 872 cetaceans have been put into captivity in China to satiate consumer demand for more marine species on exhibit. Endangered species like orcas (killer whales) and beluga whales are common among the marine animals illegally caught and sold. At least 15 Russian orcas were imported to China between 2013 and 2017. As an extremely endangered breed, the capture of any orcas is dangerous for the species – especially because once in captivity, their rate of mortality is extremely high. However, the prospect of high profits will continue to attract the capture of rare marine wildlife, legal or not. While China is not the only country fueling demand for illegally-captured cetaceans, the nation is the world’s largest driver of demand.

Animals at marine parks in China are often the subject of maltreatment including squalid conditions and poor welfare practices. Al Jazeera’s 101 East sent undercover investigators to China’s 15 biggest marine parks and discovered what was described as “widespread neglect and abuse.” At one aquarium, reporters found a freezer full of dolphin carcasses that died from over-working, with their intestines twisted from the leaps and moves they were forced to do in circus shows.

While marine shows and breeding programs in the West are winding down under intense regulation and pressure from animal welfare groups, the practice of marine shows and breeding programs is flourishing in China.

Many new marine parks in China are run by companies with little or no experience caring for cetaceans. Furthermore, all profit incentives for marine park developers and showrunners are short-term, so the moral and ethical impacts of animal maltreatment are rarely if ever, considered. The few foreign companies that run wildlife and marine parks in China adapt to Chinese standards of animal care.

Zoos and Wildlife Parks in China

Over the last five years, many zoos in China have undertaken modernization projects and built new exhibits. Zoos in China are often more akin to theme parks than scientific outposts. They are frequently run entirely by commercial principles, with little emphasis on conservation and the types of animals on display determined more by wildlife trader inventories than conservation or breeding needs.

Top 5 most famous zoos and wildlife parks as well as aquariums and marine parks in China

The most popular zoos and wildlife parks in China, by number and rating of reviews, are:

1. Dujiangyan Panda Base, Chengdu;
2. Chimelong Safari Park, Guangzhou;
3. Dalian Forest Zoo, Dalian;
4. Harbin Polarland, Harbin;
5. Chongqing Zoo, Chongqing.

Top 5 most famous aquariums and marine parks in China.The most popular aquariums and marine parks in China, by number and rating of reviews, are:

1. Chimelong Ocean Kingdom, Zhuhai;
2. Ji Di Guan Pole Aquarium, Dalian;
3. Sun Asia Ocean World and Polar World, Dalian;
4. Beijing Aquarium, Beijing;
5. Shanghai Ocean Aquarium, Shanghai.

Mistreatment of Animals in Chinese Wildlife Parks

Despite the Chinese zoo and wildlife park industry’s relatively large size, animal conditions in the parks are atrocious. Some pack animals are kept isolated, while other animals that thrive in lone-wolf situations are forced into proximity with others of their kind. Animals are often kept in tiny cages or at bare, concrete facilities. They are frequently fed the wrong foods or given inaccurate serving sizes, leading to obesity or malnourishment.

Often, animals in Chinese wildlife parks are mistreated in the name of entertainment. At the Siberian Tiger Park in Harbin, visitors can pay to throw live chickens, ducks, and even cows to tigers. At the Shanghai Wildlife Park, staff regularly ride ostriches in races. In 2010 the State Forestry Administration outlawed animal circus acts, but that regulation applies only to state-owned zoos, meaning that performances are still common in wildlife parks.

It is not just wildlife staff guilty of mistreating the captive animals. There is often little signage or supervision of visitor activity, so visitors are allowed to enter the parks without any education of proper etiquette. Tourists regularly throw junk food and trash at animals, and a visitor at the Yunnan Wildlife Park once threw RMB 10,000 into a giraffe enclosure. A tourist at the Zhuyuwan Zoo in Jiangsu pelted kangaroos with stones to get them hopping. A teenage boy at Yangzhou’s Slender West Lake scenic area attacked two black swans and stomped on their eggs. Chinese tourists at the Beijing zoo were caught chasing and manhandling peacocks, even ripping out their tail feathers for souvenirs. An elderly woman at the Dalian Forest Zoo was photographed pulling the hair off a camel and shoving it in her purse. Two Chinese men stole and ate a black swan from Xujiahui Park in Shanghai. For contrast, visitors at zoos in America are discouraged from even yelling at animals or rapping on their cages. Tourists at Chinese animal parks are alarmingly uneducated about how to treat the animals, and lax staff supervision allows the visitors to mistreat the animals.

Animal facilities in China are largely unsupervised due to overlaps between different government agencies. The Ministry of Agriculture oversees aquariums, the State Forestry Bureau is responsible for wildlife parks, and zoos are run by the Ministry of Housing and Urban-Rural Development. An animal protection law for China was considered in 2010, but ultimately struck down.

Zoos and aquariums in China vs the United States

The Zoos and Aquariums industry in the US is growing slower than in China, but still growing. The industry grew by 1.5% over the past 5 years to reach a revenue of USD 2 billion in 2018. The market size of the Zoos and Aquariums industry in the US is expected to increase by 2.9% in 2019.

The United States is often considered to have some of the highest animal welfare standards in the world, but laws regarding the display and treatment of wild animals in captivity vary by state. The Animal Welfare Act (AWA) is the primary piece of federal legislating regulating captive wild animals. The 1966 law regards “warm-blooded” animals who are bred for commercial sale, used in research, transported commercially or publicly exhibited. The AWA establishes baseline standards for the care, handling, and transport of animals exhibited in zoos. The 1973 Endangered Species Act (ESA) is another law used to protect captive wild animals that are listed as threatened or endangered. In several cases, animals held in poor conditions at zoos have been transferred to sanctuaries under the ESA. However, the US has only minimal standards for animal protection, and most state and federal governing agencies do not have the resources to adequately enforce what laws there are. China’s complete lack of animal protection laws is unique on a global scale, but even countries with such laws are not treating their captive animals much better than China is.

The future of the zoo and aquarium industry in China

There are numerous ways to draw in visitors and boost ticket sales without resorting to poaching or abusing animals in the name of entertainment. To stand apart from competitors and draw in visitors looking for a unique experience, some zoos and aquariums in China are building creative new exhibits.

The Guangzhou zoo in 2018 closed its circus performance and launched a “VR Zoo” with more than 20 devices for visitors to watch the feeding, playing, and breeding of various wild animals. The first phase of construction cost USD 3.1 million, with more investments planned. The exhibit is a massive hit, and on its first day of opening, more than 20,000 people visited the VR section of the zoo.

American company Landmark Entertainment Group plans to roll out in China a series of aquariums with a heavy virtual reality component. Visitors will spend 1/3 of their visit wearing a virtual reality headset, where at the press of a button they can virtually witness their animal of choice swim by, watch animals being fed, or even see all the fish turn to skeletons if they choose.

VR exhibits in zoos and aquariums across China fit with the government’s anticipated role of AI in the country. Beijing expects that AI should support China’s economic and social development, with batches of distinctive innovative enterprises and an ecological system of innovation.

Other animal parks in China have created unique exhibits without a VR element. Atlantis Sanya worked hard to combine water park and aquarium elements to entertain visitors in China. They boast many water rides, including a slide that takes riders in a pipe through the shark tank. Visitors can snorkel or scuba dive, feed stingrays and walk on the floor of the shark tank.

At the Lehe Ledu Wildlife Zoo in Chongqing, tourists are caged while the animals roam free. Visitors board caged vehicles that drive slowly through large animal enclosures, occasionally stopping near the animals for tourists to look at and photograph. Raw meat is hung off the sides of the vehicle to encourage animals to come closer. When the park opened in 2015, the attraction was sold out for three months straight. The “reverse zoo” inspired emulations across China, and now the Harbin Tiger Park offers a similar attraction alongside their traditional exhibits.

Exploding Chinese interest in seeing and learning about aquatic and land animals has fueled a rapid industry growth with dangerous consequences. To meet new consumer demand and fill newly built facilities, poachers are importing endangered species at an alarming rate, and the animals in captivity at Chinese parks are often kept in terrible conditions. Despite a growing number of tourists visiting marine and wildlife parks, the Chinese government has not regulated the zoo and aquarium industry so it can operate responsibly and sustainably.

Author: Alison Bogy

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World’s biggest theme-park groups

China’s Amusement Parks among the most attended in the world

In 2017, over half a billion Chinese people visited an amusement park site. China’s Amusement park spending is marked to pass $6 billion by 2019, making it the fastest growing market in the area. Disneyland  Shanghai saw over 11 million visitors in its first year of opening, exceeding its expectations. Since Disneyland’s coming to Shanghai in 2016, a number of other major Western projects are planned for development, including a Universal Studios, Six Flags, and Legoland in Beijing, Tianjin, and Shanghai respectively. Four of the leading Chinese theme park operators – Overseas Chinese Town, Chimelong, Fantawild, and Songcheng – have all topped the list for most visited parks.

The categories of amusement parks can be roughly classified into the following: Comprehensive Parks, Adventure Parks, Culture Parks, Cartoon Icon Parks, Film Parks, and Water/Ocean parks. Many parks are not exclusive to just one category, but the Chinese have brought more specific themes to parks. Simulating a Song Dynasty setting, Songcheng in Hangzhou is the most popular cultural park opened, and have continuously topped the records of highest attendance since its opening in 2014.  China has opened unique film parks, such as Changchun Film Group Corporation’s Changying Century City, and “mainland box office king” Feng Xiao Gang’s Film Town.  With new water/ocean parks opening monthly, China is also developing a lucrative marine park industry.  Chimelong Water Park in Guangzhou currently stands as the most visited water park in the world. Haichang Ocean Park Holdings China’s largest marine park operator is planning to open multiple new destinations along the silk route.

Feng Xiao Gang’s Film Town

Three Six Flags parks in Nanjing among many more to open soon

China expects a large number of major amusement parks to open around the next 5 years. Projects will take place in Tianjin (2018), Zhejiang (2019), Bishan (2019), and three parks in Nanjing (2021). A Universal Studios also expects to open in 2019, with double the budget as previous projects. Legoland Shanghai is also planned for 2022, building off of the 2019 Lego Land Discovery Center. Despite these foreign entrants, the theme park landscape in China is still dominated by Chinese companies. The future plans of these Chinese theme park operators are even more ambitious. Haichang Ocean Park expects 4 more parks by 2020. Wanda expressed a desire to open 15 more amusement parks and entertainment complexes by the same year. Overseas Chinese Town (OCT) currently has 3 parks under construction in Guangdong, Jiangsu, and Hunan, all are expected to open by 2019.

Chinese are spending more on the leisure industry than ever before

Behind the boom of China’s Amusement Park industry are Chinese consumers demanding quality and unique options from the entertainment industry. The Chinese are spending more money on the leisure industry than they have ever spent before, surpassing Japan to becoming the second leisure market in the world. Amongst the highest perceived activities are theme parks, as there is a pivot towards newer activities such as cruises and theme parks, which the Chinese perceive to be of higher value for its cost. As the consumption shifts from more traditional forms of entertainment such as Karaoke(KTV), the planned growth in the various types of theme parks in China is not only grown tremendously but only expected to grow even more.

Earnings from domestic tourism from 2005 to 2015

Consumer leisure expenditure in China

Spending on theme park facilities remains high amongst Chinese Consumers

While the Chinese are now more selective about their spending, amusement parks are places where consumers are willing to spend more money.  In terms of in-park spending, a consumer report by Mintel showed that around 81% of consumers of urban Chinese consumers aged 20 – 49 have made food and drink purchases at theme parks, 76% made ticket purchases, and 59% bought souvenirs or themed merchandise. To increase profits, theme parks often develop and/or operate facilities for food/dining, hotels, retails, and other recreational opportunities. Such comprehensive facilities generate higher consumption as it extends the total tourists’ stay-time and creates loyalty for customers for the park and its brand. Most successful theme parks across China provide hotels within their parks or hotels of their branded hotels surrounding the park area. As Chinese consumers are now looking for new, quality, holistic leisurely experiences, the development of amusement park facilities such as quality dining opportunities and living accommodations greatly suits this demand and actively increases; since such offerings would create a comprehensive experience that is very different from their everyday lives.

The theme park boom attracts Chinese government attention

The explosive growth of the amusement park industry over the past few years have ignited government concern over many areas surrounding its development. In April of 2018, the National Development and Reform Commission (NDRC) stated: “In the development of theme parks we’ve seen unclear concepts, blind construction, imitations and plagiarism, low-standard duplication and other issues.” The NDRC seems to have two primary areas of concern: housing and office projects disguised as theme parks, and the debt incurred by such projects on municipal and provincial governments that are often co-sponsors of these projects. Thus, the commission has ordered parks costing more than $235 million would be subject to “special scrutiny,” and mega-parks costing more than $790 million or occupying 330 acres must seek central and regional government approval. These regulations are more targeted towards large-scale projects, thus big international operators such as Disney and Universal are unlikely to be affected. However, low-tier cities that are already highly indebted will likely face more scrutiny even smaller scale construction.

A wealth of opportunities for foreign and domestic amusement park markets

In spite of new government directives, domestic tourism continues to become more popular in China, as domestic tourism has become a symbol of national urban development for many Chinese cities. In recent years, amusement parks in China have lessened tourist traffic in popular surrounding countries such as Japan and Korea. However according to the Theme Entertainment Association, the number of world-class theme parks per 100 million people in China is only 0.2, compared to 2.5 and 3.1 in the US and Japan respectively, thus demonstrating the substantial room for growth for foreign and domestic markets alike.

Disneyland Shanghai

The entry of international companies and increased investments made by both international and local players have accelerated overall leisure industry growth in the recent years of China’s booming theme park age. As the tremendous potential of the Chinese amusement park industry continues to be captured by big foreign players, growing domestic companies are also fueling the intense competition in the Chinese theme park market. Fantawild operates over 20 parks in China and is the second largest domestic theme park group and the fifth largest internationally. It plans to build another 20 parks both in China and abroad in the next 5 years. With many Chinese operators acting upon aggressive plans for expanding its theme park businesses, China is set to transform into a land of quality amusement parks and a hot spot for leisure tourism.

Western Markets: East-West IP Alliances show promising opportunities

Demonstrated by the recent IP infringement of Disney “Stormtroopers” in one of Dalian Wanda’s theme parks, it is evident that the booming amusement park age has also ushered in an age of IP battles. Chinese companies must compete against foreign companies with the highest IP, such as Walt Disney characters. Many companies have entered in IP Alliances, allowing collaboration between parks and its operators, enhancing the brand for both parties. There are three ways to access global IP access: acquiring the company of IP ownership, a joint venture, or signing an exclusive licensing deal. For instance, Disney has a joint venture with the Shanghai government, with licensing deal signed for use of Disney names, Characters, stories, etc. While IP alliances are a complicated process, as more foreign amusement park players looking to enter the China, more alliances are expected to be made, bridging the east-west leisure industry market through collaboration on amusement park expansion.

Stormtroopers at Wanda Movie Park

In addition, China is in the process of accumulating its own IP creations.  Fantawild has created a series of cartoon characters of “Boonie Bears.” China Animation has invested a lot of money into its new character “Violet,” which has already added in the Shanghai Joypolis attractions. Changzhou Dinosaur Park has created a cartoon star “Baby Dinosaur.”

Boonie Bears Fantawild

Safety and customer experience should be top priorities when entering the Chinese Market

The desire for quality, new experiences from a wealthier generation of Chinese consumers is the main consumer drive for the booming theme park industry. This population is looking to expand their options for the leisure market, beyond traditional activities such as shopping and karaoke. The successful player should consider safety concerns as well, due to the issues with safety mechanisms in previous smaller local Chinese theme parks. Safety also plays heavily into the perception of a better customer experience a whole, along with an array of options for quality dining and concessions, hotels, and themed merchandise. Consumers are looking to experience the whole package at theme parks, from comprehensive facilities to innovative rides, to enticing theme park characters.

Author: Julia Qi

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