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Focus: Travel and Tourism

The New Face of Tourism in China

China's tourism experience has changed dramatically in the last few decades—for the better

by Chase Poffenberger and David Parry

Beginning with a trickle of intrepid pathfinders in the late 1970s, foreign tourists have been making China a "must-see" destination in rapidly increasing numbers. In 1979, China hosted only 5.7 million foreign visitors, nearly all of whom were from Hong Kong, Macao, and Taiwan. By 2005, China received 120.3 million foreign visitors, more than 80 percent of whom were from Hong Kong, Macao, and Taiwan. Like the rest of its economy, China's tourism sector has changed dramatically in the last 20 years.

According to the World Travel and Tourism Council's April 2006 report on China, the country's travel and tourism industry generated $353.7 billion in 2006 and is expected to grow to $1.3 trillion in 2016, or roughly 8.7 percent per year on average. In 2006, foreign visitors were expected to spend $75.1 billion and account for 7.4 percent of China's total exports. The travel and tourism industry was expected to account for 2.9 percent of China's total GDP directly (13.7 percent when indirect effects are included). Tourism provides 17.4 million jobs in China, or 2.3 percent of total employment in 2006, and is forecast to support 20.4 million jobs, or 2.5 percent of the total, by 2016. In total, 10.2 percent of all jobs, or 77.6 million, in China depended on travel and tourism in 2006.

Most tourists to China still go on a package tour. The most common itineraries visit Beijing; Guilin, Guangxi; Shanghai; Xi'an, Shaanxi; and the Yangzi River over 12-14 days. Tourists are rushing to see the Three Gorges area before the reservoir created by the Three Gorges Dam floods it completely. With a new fleet of luxury river vessels available, the Yangzi River has become a centerpiece of many mainstream itineraries. Hotels for these tours tend to be joint ventures and range from three to five stars.

New demand for luxury

The US Baby Boomer generation is far more sophisticated and educated than its predecessors, and the same characteristics are true of boomers in other Western countries. These characteristics, combined with the trend among mid-market consumers in the United States to selectively purchase luxury goods and experiences that used to be reserved for the wealthy, are creating a broader market of travel buyers who are willing to pay a premium for an upscale travel experience to China. (Luxury tours often start at $500 per day. These tours also last about 14 days on average.)

The main determinants of a luxury tour are the type of staff (guides, lecturers, tour managers), the choice of hotels or cruise ships, and how time is spent on tour. (Lower-cost tours often have more time built in for shopping and more standard meals at tourist spots.) Though luxury tours still constitute only a small portion of tours to China, top-end hotels in China are reaping the benefits of the growing appetite for luxury by adding spa services and upscale cuisine. Tour operators are also filling the demand for "authentic" travel experiences by supplementing traditional sightseeing with more hands-on learning that allows foreign tourists to connect with local people. These activities include meetings with school children and university professors; special access to sights, such as entry to the archeological pit in Xi'an to view the terra cotta warriors up close; guided tours of Beijing's hutong (historic residential alleys) to see daily life; a visit to a rural village; cooking, calligraphy, and tai qi lessons; and kite flying in Tiananmen Square.

More specialized tours are also available. Niche tours that focus on adventure, rail, history, hiking, and other areas are becoming more common, though they still account for only a small portion of the tour market. Because accommodations generally determine tour price, these niche tours, which generally do not use luxury hotels, are not necessarily more expensive.

Better service

Chinese tourists with increasing amounts of disposable income have helped raise China's service levels dramatically in a relatively short time. In many cases, Chinese tourists spend more per capita than Hong Kong tourists in China, although Hong Kong tourists still have higher incomes.

Chinese tourists with increasing amounts of disposable income have helped raise China's service levels dramatically in a relatively short time.

Technology has also improved tour service. With the proliferation of cell phones, service corrections can happen almost instantly. For example, if a bus breaks down, guides can obtain a new bus within half an hour. About 10 years ago, it took much longer to get government approvals for a new bus, and schedules were so disrupted that tours would miss sights. Luxury train tours also benefit from this new flexibility—staff on the train can communicate with staff on the ground about schedules and changes, and itineraries can be altered to give tourists a customized experience.

Other service improvements have made trips more enjoyable. For instance, Western food is more widely available, transport is more reliable and more comfortable, hotels are cleaner, and staff throughout the sector generally speak better English and thus can help customers more easily. In general, the more stars a hotel has, the better the level of English among the staff. There is still room for improvement, however, particularly in China's western cities. And foreign tourists who do not speak English may have difficulty finding someone who speaks their language.

Tourists also have a greater range of choices and can now book airfares and obtain visas on their own. Tours often leave some meals unscheduled so that travelers can experience world-class restaurants now common in China's cities. In addition, the greater range of culinary choices means that not every meal has to be Chinese food.

Finally, safety has also improved, and most reputable tour operators offer evacuation insurance automatically as part of the package price. In addition, travel insurance to cover trip interruption, baggage loss, and other unforeseen events is widely available for China travel.

Another welcome change stemming from China's focus on the economy is the increased openness of the guides. For the most part, tourists are no longer subject to a closely scripted delivery of information, and many foreigners unfamiliar with China are surprised when their local and national guides speak their mind. The approach of local guides tends to fall along generational lines. Older guides who remember the Cultural Revolution often share stories of survival and tend to view Chinese history since the 1970s as positive, in contrast to the hardships they endured earlier. On the other hand, guides who are too young to remember the Cultural Revolution tend to be more critical of China.

2008 Olympics: More than just a game

Many professionals involved with China's tourism industry view the 2008 Olympic Games as more than a prestigious event; it is widely seen as China's debut on the world stage. Well before the country won its bid for the 2008 Olympics, it embarked on a massive infrastructure expansion program. At the national level, China is upgrading its railways and building a highway network that is based on—and that will rival—the US interstate system. Cities expanding rapidly during the economic boom of the last few years are building new roads, expressways, and rail systems.

As host city to the 2008 Olympic Games, Beijing in particular is being transformed. Visitors to China during and after the Olympics will stay in new hotels, ride new subway lines, and watch sporting events in brand new venues. Apart from the new transportation infrastructure, the city is trying to improve its "software." China's capital is not only improving the foreign language ability of workers who are likely to come into contact with foreign visitors during the Olympics, but is also making efforts to encourage greater civility among such workers and ordinary citizens.

Given the current level of international interest in China and the new infrastructure and improved service levels, experts believe that China is well poised to overcome the historical dip in tourism a host country experiences for two years before and after the Olympics. Selling travel during the Olympic Games has always been a mixed bag for tour operators. Many travel companies plan to avoid selling travel to China during the Olympics because of the widespread perception that Beijing will be crowded, prices high, and hotel rooms scarce.

Only more to come

Tourism in China has changed dramatically in recent years. On the domestic front, China's new middle class is taking to the road in unprecedented numbers, creating new demand for better facilities, infrastructure, and services, which, in turn, benefit foreign visitors. Tours to China are also changing, with greater variety in focus, cost, and level of comfort. China's newfound prominence on the world stage, which will hit new heights during the 2008 Beijing Olympics, seems to indicate that the country's tourism sector will remain vibrant for years to come.

Vying for Air Routes

In 2004, the United States and China signed an agreement that will raise the number of flights between the two countries from 54 per week in 2004 to 249 per week in 2010, when the agreement is fully phased in. Of the new frequencies, 84 will be for passengers, the remainder for cargo.

The US Department of Transportation (DOT) can award up to seven weekly flights to Beijing, Guangzhou, or Shanghai beginning March 25, 2007. As the last few opportunities to gain new flights under the 2004 agreement near, the competition for landing rights in China has heated up, with four US airlines vying for the right to offer new air service to China. In August, United Airlines, Inc. filed an application with DOT for daily flights between Beijing and Washington, DC. Northwest Airlines Corp. filed the same day for daily flights between Beijing and Detroit, Michigan. Continental Airlines, Inc. proposed daily service between Shanghai and Newark, New Jersey, and AMR Corp.'s American Airlines is vying for daily service between Beijing and Dallas/Ft. Worth in Texas.

The number of air passengers flying from the United States to China doubled between 2000 and 2005, according to the US Department of Commerce's International Trade Administration. Airfares are expected to remain competitive.

—Chase Poffenberger and David Parry

Changing Impressions

Elvira Hammond, an assistant professor of history at New Mexico State University who has led three dozen groups of educational travelers to various parts of China, remembers the "old days" of travel to China. In the early 1980s, service was spotty, and American travelers faced with unfamiliar food feared they might starve. Two decades later, she marvels at the changes each time she brings another group back. "The service standard is so different now," Hammond explains. "In the past, guides used to be inflexible and often asked groups to just accept a change or omission. Today, cell phone coverage in China is greater than it is in the United States, so quality can be upgraded and changes made while a tour is under way. This has changed the nature of how service is provided."

Economic growth has brought about other changes too. Rising income levels mean that more Chinese are traveling than ever before. Despite rapidly growing tourist arrivals from the United States and the rest of the world, domestic tourists still account for 90 percent of China's tourism market. The effect of this booming domestic market on a foreign traveler's experience in China is significant.

For the first time, mainland Chinese tourists are on the same cruise ships and in the same hotels as US tourists, and many Chinese tourists speak English. Foreign tourists are now interacting with Chinese tourists during their shared experiences. Although cultural differences, over etiquette and smoking, for instance, can sometimes cause great friction, on the whole, the presence of Chinese tourists significantly enriches the experience of foreign tourists.

The massive creation of new infrastructure also plays a large role in changing Americans' perceptions of China as a tourist destination. Many American tourists are surprised by the modern architecture and rapid pace of life in cities like Beijing and Shanghai. They are also surprised by the use of cutting-edge technology in some areas—for example, the world's only commercial magnetic levitation train in operation is in Shanghai. After visiting the country, most American tourists view China as a much more dynamic society.

—Chase Poffenberger and David Parry

Rules for Foreign Investment in Tourism

When China joined the World Trade Organization (WTO) in 2001, it agreed to gradually open the tourism sector, including hotels and restaurants.

Hotels and restaurants

Upon China's accession to the WTO, foreign service suppliers could construct, renovate, and operate joint-venture (JV) hotels and restaurants, with majority foreign ownership. In addition, foreign managers and specialists, including chefs and executives, were permitted to work in these ventures.

Travel agencies and tour operators

Upon China's accession to the WTO, travel agencies and tour operators that mainly engaged in travel business and had annual worldwide turnover of at least $40 million could form JVs with a minority foreign stake and provide services in designated holiday resorts and in the cities of Beijing; Shanghai; Guangzhou; and Xi'an, Shaanxi. The JV must have a registered capital of ¥4 million (about $510,000), an amount that was to be lowered to ¥2.5 million (about $320,000) by December 11, 2004. China committed to allow wholly foreign-owned subsidiaries and remove all geographic restrictions by December 11, 2007. By June 2005, China had met all of these commitments.

Travel agencies and tour operators may provide travel and hotel accommodation services for foreign and domestic travelers, conduct tours within China for domestic and foreign travelers, and provide travelers check cashing services within China. They may not provide outbound travel services for PRC citizens.

—CBR staff

Chase Poffenberger is vice president, marketing, at Washington, DC-based Academic Travel Abroad (ATA).

David Parry is president of ATA.

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	China Foto Press E-Mail \| Print \| License Focus: Travel and Tourism The New Face of Tourism in China China's tourism experience has changed dramatically in the last few decades—for the better by Chase Poffenberger and David Parry Beginning with a trickle of intrepid pathfinders in the late 1970s, foreign tourists have been making China a "must-see" destination in rapidly increasing numbers. In 1979, China hosted only 5.7 million foreign visitors, nearly all of whom were from Hong Kong, Macao, and Taiwan. By 2005, China received 120.3 million foreign visitors, more than 80 percent of whom were from Hong Kong, Macao, and Taiwan. Like the rest of its economy, China's tourism sector has changed dramatically in the last 20 years. According to the World Travel and Tourism Council's April 2006 report on China, the country's travel and tourism industry generated $353.7 billion in 2006 and is expected to grow to $1.3 trillion in 2016, or roughly 8.7 percent per year on average. In 2006, foreign visitors were expected to spend $75.1 billion and account for 7.4 percent of China's total exports. The travel and tourism industry was expected to account for 2.9 percent of China's total GDP directly (13.7 percent when indirect effects are included). Tourism provides 17.4 million jobs in China, or 2.3 percent of total employment in 2006, and is forecast to support 20.4 million jobs, or 2.5 percent of the total, by 2016. In total, 10.2 percent of all jobs, or 77.6 million, in China depended on travel and tourism in 2006. Most tourists to China still go on a package tour. The most common itineraries visit Beijing; Guilin, Guangxi; Shanghai; Xi'an, Shaanxi; and the Yangzi River over 12-14 days. Tourists are rushing to see the Three Gorges area before the reservoir created by the Three Gorges Dam floods it completely. With a new fleet of luxury river vessels available, the Yangzi River has become a centerpiece of many mainstream itineraries. Hotels for these tours tend to be joint ventures and range from three to five stars. New demand for luxury The US Baby Boomer generation is far more sophisticated and educated than its predecessors, and the same characteristics are true of boomers in other Western countries. These characteristics, combined with the trend among mid-market consumers in the United States to selectively purchase luxury goods and experiences that used to be reserved for the wealthy, are creating a broader market of travel buyers who are willing to pay a premium for an upscale travel experience to China. (Luxury tours often start at $500 per day. These tours also last about 14 days on average.) The main determinants of a luxury tour are the type of staff (guides, lecturers, tour managers), the choice of hotels or cruise ships, and how time is spent on tour. (Lower-cost tours often have more time built in for shopping and more standard meals at tourist spots.) Though luxury tours still constitute only a small portion of tours to China, top-end hotels in China are reaping the benefits of the growing appetite for luxury by adding spa services and upscale cuisine. Tour operators are also filling the demand for "authentic" travel experiences by supplementing traditional sightseeing with more hands-on learning that allows foreign tourists to connect with local people. These activities include meetings with school children and university professors; special access to sights, such as entry to the archeological pit in Xi'an to view the terra cotta warriors up close; guided tours of Beijing's hutong (historic residential alleys) to see daily life; a visit to a rural village; cooking, calligraphy, and tai qi lessons; and kite flying in Tiananmen Square. More specialized tours are also available. Niche tours that focus on adventure, rail, history, hiking, and other areas are becoming more common, though they still account for only a small portion of the tour market. Because accommodations generally determine tour price, these niche tours, which generally do not use luxury hotels, are not necessarily more expensive. Better service Chinese tourists with increasing amounts of disposable income have helped raise China's service levels dramatically in a relatively short time. In many cases, Chinese tourists spend more per capita than Hong Kong tourists in China, although Hong Kong tourists still have higher incomes. Chinese tourists with increasing amounts of disposable income have helped raise China's service levels dramatically in a relatively short time. Technology has also improved tour service. With the proliferation of cell phones, service corrections can happen almost instantly. For example, if a bus breaks down, guides can obtain a new bus within half an hour. About 10 years ago, it took much longer to get government approvals for a new bus, and schedules were so disrupted that tours would miss sights. Luxury train tours also benefit from this new flexibility—staff on the train can communicate with staff on the ground about schedules and changes, and itineraries can be altered to give tourists a customized experience. Other service improvements have made trips more enjoyable. For instance, Western food is more widely available, transport is more reliable and more comfortable, hotels are cleaner, and staff throughout the sector generally speak better English and thus can help customers more easily. In general, the more stars a hotel has, the better the level of English among the staff. There is still room for improvement, however, particularly in China's western cities. And foreign tourists who do not speak English may have difficulty finding someone who speaks their language. Tourists also have a greater range of choices and can now book airfares and obtain visas on their own. Tours often leave some meals unscheduled so that travelers can experience world-class restaurants now common in China's cities. In addition, the greater range of culinary choices means that not every meal has to be Chinese food. Finally, safety has also improved, and most reputable tour operators offer evacuation insurance automatically as part of the package price. In addition, travel insurance to cover trip interruption, baggage loss, and other unforeseen events is widely available for China travel. Another welcome change stemming from China's focus on the economy is the increased openness of the guides. For the most part, tourists are no longer subject to a closely scripted delivery of information, and many foreigners unfamiliar with China are surprised when their local and national guides speak their mind. The approach of local guides tends to fall along generational lines. Older guides who remember the Cultural Revolution often share stories of survival and tend to view Chinese history since the 1970s as positive, in contrast to the hardships they endured earlier. On the other hand, guides who are too young to remember the Cultural Revolution tend to be more critical of China. 2008 Olympics: More than just a game Many professionals involved with China's tourism industry view the 2008 Olympic Games as more than a prestigious event; it is widely seen as China's debut on the world stage. Well before the country won its bid for the 2008 Olympics, it embarked on a massive infrastructure expansion program. At the national level, China is upgrading its railways and building a highway network that is based on—and that will rival—the US interstate system. Cities expanding rapidly during the economic boom of the last few years are building new roads, expressways, and rail systems. As host city to the 2008 Olympic Games, Beijing in particular is being transformed. Visitors to China during and after the Olympics will stay in new hotels, ride new subway lines, and watch sporting events in brand new venues. Apart from the new transportation infrastructure, the city is trying to improve its "software." China's capital is not only improving the foreign language ability of workers who are likely to come into contact with foreign visitors during the Olympics, but is also making efforts to encourage greater civility among such workers and ordinary citizens. Given the current level of international interest in China and the new infrastructure and improved service levels, experts believe that China is well poised to overcome the historical dip in tourism a host country experiences for two years before and after the Olympics. Selling travel during the Olympic Games has always been a mixed bag for tour operators. Many travel companies plan to avoid selling travel to China during the Olympics because of the widespread perception that Beijing will be crowded, prices high, and hotel rooms scarce. Only more to come Tourism in China has changed dramatically in recent years. On the domestic front, China's new middle class is taking to the road in unprecedented numbers, creating new demand for better facilities, infrastructure, and services, which, in turn, benefit foreign visitors. Tours to China are also changing, with greater variety in focus, cost, and level of comfort. China's newfound prominence on the world stage, which will hit new heights during the 2008 Beijing Olympics, seems to indicate that the country's tourism sector will remain vibrant for years to come. Vying for Air Routes In 2004, the United States and China signed an agreement that will raise the number of flights between the two countries from 54 per week in 2004 to 249 per week in 2010, when the agreement is fully phased in. Of the new frequencies, 84 will be for passengers, the remainder for cargo. The US Department of Transportation (DOT) can award up to seven weekly flights to Beijing, Guangzhou, or Shanghai beginning March 25, 2007. As the last few opportunities to gain new flights under the 2004 agreement near, the competition for landing rights in China has heated up, with four US airlines vying for the right to offer new air service to China. In August, United Airlines, Inc. filed an application with DOT for daily flights between Beijing and Washington, DC. Northwest Airlines Corp. filed the same day for daily flights between Beijing and Detroit, Michigan. Continental Airlines, Inc. proposed daily service between Shanghai and Newark, New Jersey, and AMR Corp.'s American Airlines is vying for daily service between Beijing and Dallas/Ft. Worth in Texas. The number of air passengers flying from the United States to China doubled between 2000 and 2005, according to the US Department of Commerce's International Trade Administration. Airfares are expected to remain competitive. —Chase Poffenberger and David Parry Changing Impressions Elvira Hammond, an assistant professor of history at New Mexico State University who has led three dozen groups of educational travelers to various parts of China, remembers the "old days" of travel to China. In the early 1980s, service was spotty, and American travelers faced with unfamiliar food feared they might starve. Two decades later, she marvels at the changes each time she brings another group back. "The service standard is so different now," Hammond explains. "In the past, guides used to be inflexible and often asked groups to just accept a change or omission. Today, cell phone coverage in China is greater than it is in the United States, so quality can be upgraded and changes made while a tour is under way. This has changed the nature of how service is provided." Economic growth has brought about other changes too. Rising income levels mean that more Chinese are traveling than ever before. Despite rapidly growing tourist arrivals from the United States and the rest of the world, domestic tourists still account for 90 percent of China's tourism market. The effect of this booming domestic market on a foreign traveler's experience in China is significant. For the first time, mainland Chinese tourists are on the same cruise ships and in the same hotels as US tourists, and many Chinese tourists speak English. Foreign tourists are now interacting with Chinese tourists during their shared experiences. Although cultural differences, over etiquette and smoking, for instance, can sometimes cause great friction, on the whole, the presence of Chinese tourists significantly enriches the experience of foreign tourists. The massive creation of new infrastructure also plays a large role in changing Americans' perceptions of China as a tourist destination. Many American tourists are surprised by the modern architecture and rapid pace of life in cities like Beijing and Shanghai. They are also surprised by the use of cutting-edge technology in some areas—for example, the world's only commercial magnetic levitation train in operation is in Shanghai. After visiting the country, most American tourists view China as a much more dynamic society. —Chase Poffenberger and David Parry Rules for Foreign Investment in Tourism When China joined the World Trade Organization (WTO) in 2001, it agreed to gradually open the tourism sector, including hotels and restaurants. Hotels and restaurants Upon China's accession to the WTO, foreign service suppliers could construct, renovate, and operate joint-venture (JV) hotels and restaurants, with majority foreign ownership. In addition, foreign managers and specialists, including chefs and executives, were permitted to work in these ventures. Travel agencies and tour operators Upon China's accession to the WTO, travel agencies and tour operators that mainly engaged in travel business and had annual worldwide turnover of at least $40 million could form JVs with a minority foreign stake and provide services in designated holiday resorts and in the cities of Beijing; Shanghai; Guangzhou; and Xi'an, Shaanxi. The JV must have a registered capital of ¥4 million (about $510,000), an amount that was to be lowered to ¥2.5 million (about $320,000) by December 11, 2004. China committed to allow wholly foreign-owned subsidiaries and remove all geographic restrictions by December 11, 2007. By June 2005, China had met all of these commitments. Travel agencies and tour operators may provide travel and hotel accommodation services for foreign and domestic travelers, conduct tours within China for domestic and foreign travelers, and provide travelers check cashing services within China. They may not provide outbound travel services for PRC citizens. —CBR staff Chase Poffenberger is vice president, marketing, at Washington, DC-based Academic Travel Abroad (ATA). David Parry is president of ATA. Further Reading Tourism Takes Off Click here for copyright permissions Copyright 2007 US-China Business Council Top of Page Table of Contents
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