Connecting with the new Chinese TravellerA world of opportunity for brands

Inviting you to explore the exciting opportunities this offers, PSI shares a tantalising slice of insider data and outlines just some of the psychology now driving the Chinese travel consumer.

Key to the following insight is PSI’s strategic partnership with ForwardKeys -a company dedicated to studying global travel movements. With access to data from all major global air reservation systems, as well as independent data sets and

data science, over 17 million booking transactions are analysed daily, detailing who’s been flying where and when, as well as predicting future patterns.

When overlaid with PSI’s unique OCS* insight, plus location heat-mapping across 48 of the most prominent global cities, PSI is able to advise partners on the best solutions to target business and leisure audiences as they fly between, and spend time in, the world’s busiest urban centres.

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China’s growing love affair with international destinations has seen a significant increase in air travel and overseas spending, with numbers predicted to rise exponentially by 2023.

*OCS: Outdoor Consumer Survey - lifestyle and media insights covering 100,000 respondents globally.

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The Opportunity

Mainland China is experiencing rapid growth amongst its middle classes and with this change comes greater prosperity. This increased spending power means that Chinese consumers are now contributing over half of their disposable income to the travel market, with the leisure sector projected to account for 62% of all their travel by 2023.

Traditionally, China’s travellers opted for shorter-haul destinations, with Special Administrative Regions (SARs) - such as Hong Kong and Macao - receiving almost half of all travel. However, between 2013 and 2023, 61 million households in China are expected to earn above USD 35,000 per annum – considered a key income threshold for opening up international travel.

According to TripAdvisor China, almost half of Chinese visitors to the site are now researching destinations outside Asia, with Paris, Rome, London, Los Angeles and New York amongst the most popular. Predictions suggest that by 2020 Chinese visitors will represent 9% of all North America’s tourists, 19% of Europe’s, and 29% of Australia and New Zealand’s tourists.

As for Europe, the UK saw an 18% increase in Chinese tourists during the first half of this year, 13% of whom combined their trip with at least one other European country. Travel from China to Germany saw a 7% increase within the same period with 34% of these visitors then visiting at least one other European country.

What’s more, these increasing numbers don’t just originate from the four Chinese Tier 1 Cities (Beijing, Shanghai, Chongqing and Guangzhou). The top 5 Chinese airports by passenger growth are: Xi’an, Tianjin, Haikou, Shenzhen and Chengdu. Wenzhou and Xiamen are also increasingly important cities in terms of their population profiles.

The three segments of the outbound leisure market expected to grow the fastest are affluent youths (aged18 to 30), senior professionals (aged 45 to 55), and small groups of families and friends (aged 30 to 45 – increasingly travelling independently, but also part of organised tours). Cities are their primary destinations accounting for over 85% of outbound travel and when SAR regions are excluded, it still remains that 70% of all outbound travel is to major cities.

When it comes to duration of stay, London is currently one of the top long-haul cities globally, with an average stay of 7 nights. Melbourne and Sydney come in a close second, at 6.5 nights.

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Technology Transcends Chinese Censorship

At present, the Chinese Government prohibits foreign travel agencies from participating directly in the outbound tour business. The solution? WeChat.

WeChat’s seamless interface across the most popular Chinese apps includes those offering travel-related services. This all-in-one capability (messaging, commerce and payment cross-services) makes WeChat extremely powerful, especially given that it’s enjoyed by over 938 million active users.

Once users have booked any kind of travel through the platform, WeChat sends them an invitation to a group chat facility, enabling communication and sharing between those heading to the same destinations. Opportunity for advertisers to participate in these forums is prime. Furthermore, WeChat’s WeShake functionality allows advertisers to transfer additional content to these audiences on their handsets, through a simple ‘shake’ interaction with beacon-enabled OOH formats along their travel corridor.

Other popular travel-related platforms currently include: Sougou (China’s equivalent of Google), Youku (comparable to Youtube), Qunar (similar to Skyscanner), Ctrip and eLong (China’s version of Trivago or booking.com), 12306 (train journey planning) and Didi (challenging Uber).

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How to Spend It!

By 2030, Chinese travellers are expected to spend USD 700 billion annually during overseas trips. Shopping abroad offers consumers the chance to purchase premium goods such as handbags and watches, aided by favourable exchange rates, and at the same time swerving China’s 30% luxury goods tax. Currently this brings the average UK spend of Chinese tourists to £2,174 (200% more than the average visitor).

According to tax rebate company, Global Blue, Chinese global shoppers currently account for nearly 30% of all tax-free shopping worldwide. Some 80% of Chinese travellers make overseas purchases, and nearly 30% base their destination choice on retail opportunities.

Global Blue is currently in the process of expanding real-time VAT digital refund services across its European airport network. Initially launched in Milan, Munich and Helsinki airports earlier this year, these services are now available across a further 14 airports, including Madrid, Amsterdam, Stockholm and Zurich.

Understanding how, when and where Chinese consumers pay for goods and services whilst abroad is key to engaging them effectively. Hotels are increasingly

adjusting their on-site food and beverage offerings, as well as their customer services and interior design to reflect the desires of this lucrative Chinese audience.

10 million Chinese tourists visited Thailand in 2015. 6 million of them shopped at King Power outlets, the country’s largest duty-free retail group. Chinese tourists are King Power’s largest customer base accounting for 80% of revenue. Importantly, such retail is no longer confined to airport terminals. Across Asia we are seeing the construction of large downtown malls by duty-free operators such as King Power, Shilla and Lotte, featuring on-site luxury hotel accommodation, casino facilities and other premium entertainment. For some luxury brands, up to 50% of their duty-free sales are now attributed to downtown retail.

China has shifted to virtual forms of payment faster than any other market. King Power offers Chinese consumers the chance to purchase store cards online before their vacation, loading these with special promotional discounts. 87% of people in China already pay via third-party mobile payment systems like Alipay and WeChat Pay, both of which are beginning to set up shop in popular global tourist destinations. Furthermore, Global Blue customers can now receive their tax refunds directly to their Alipay wallets on mobile devices.

The Power of E-Commerce in China

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China sees more e-commerce activity than any country in the world today. Chinese consumers spent $750 billion online in 2016, which is more than the US and the UK combined.

Unlike its western counterparts, China’s e-commerce is uniquely centralised with most retailers operating storefronts on Alibaba’s business-to-consumer site, Tmall.com. In fact, a whopping 75% of Chinese e-commerce is transacted through Alibaba, which includes Tmall and sister site Taobao (Alibaba’s consumer-to-consumer sales site).

Tmall Global (Alibaba’s international brand shopping division) has launched a service allowing Chinese tourists to prepay for duty-free purchases online before going on vacation, and then picking these up at the airport. Such is the influence of Alibaba that its founders have managed to agree with customs authorities in many cities like Shanghai and Guangzhou to speed up clearance procedures.

Overall transactions with Tmall Global have increased more than 10 times since its launch and more than 100 overseas brands, including some of Europe’s leading supermarkets, are currently waiting in the wings to set up stores on its interface.

WeChat will soon start offering its e-commerce platform for European companies to sell goods in China. Luxury groups such as Burberry, Coach and Chanel already use WeChat to tell consumers about new arrivals and trending items, or to showcase campaigns linked to events like Chinese New Year (a key retail period). Other notable online retailers include JD.com and Amazon China.

Furthermore, China offers shipping that is far cheaper than in western markets which has prompted a thriving e-commerce market even for one-off (and same day) purchases of inexpensive items, which has no parallel in other major economies. Someone who wants to brush their teeth before an important client meeting can simply press a button and a toothbrush and toothpaste will be on their desk within an hour, for a negligible (or non-existent) shipping fee. This burgeoning market has been bolstered by the Chinese Government’s recent crack down on grey-market daigou (personal shoppers) bringing goods into China, with officials stepping up checks at airports, and imposing fines or smuggling charges on those entering China with goods deemed for non-personal use.

In short China is leading the way as the world’s largest (and fastest growing) e-commerce market.

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On the Couchwith the Chinese Purchase Mindset

Shopping remains a key driver in terms of travel destinations. Other motives include sightseeing, relaxation and, increasingly, special experiences - thus increasing consideration for destinations such as New Zealand. Perceived safety and ease of visa access are also key.

In terms of choosing where to stay, luxury hotel brands remain at the top of the desirability chart, but high-end boutique brands are becoming more and more popular. As for airlines: price, safety record, and seat comfort come first.

A broader look at what impacts Chinese purchase choices leads into a sophisticated world where peer feedback and social media platforms are extremely important influencers in the decision-making process. Blogs and online marketplaces like Taobao, entertainment apps and WeChat are therefore hugely significant. In fact, internet influencers drive consumers to spend almost 30 minutes a day on Alibaba’s Taobao - that’s nearly three times longer than an American consumer typically spends on Amazon. Brand loyalty is an increasingly relevant value in the market; the typical Chinese teenager can recall 20 cosmetics brands while the average US teen can identify just 14.

Another notable insight into the current Chinese mindset is a growing obsession with health products. In the wake of an influx of fake and contaminated wellbeing products on the Chinese market, Australia and Japan - who enjoy unequivocal Chinese consumer trust - are seeing a particular boom in sales for this sector.

Even duty free retail - traditionally the reserve of luxury goods and perfumes - is increasingly allocating shelf space for vitamin supplements and infant care products. The Chinese appetite for Australian powdered milk is such that supermarket chains Coles and Woolworths have seen the need to introduce a four-tins-per-person limit.

Digressing slightly, it’s worth noting here that Australia is also benefiting in terms of education, which has quickly become a highly prized Chinese export. The rise of overseas students into the country is also bringing associated benefits to the economy such as housing and retail sales.

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While the iron is Hot…

Clearly the opportunities are ripe and plenty, so what better time to look for an OOH expert to navigate the ever-changing dynamics of the global travel market?

PSI is the world’s largest international OOH specialist. Operating from a central hub in London, its 60-strong team delivers compelling location-based marketing solutions across airports and city centres worldwide.

This expertise in communicating with audiences stems from a deep understanding of local market nuances, collaboration with a global network of 57 local offices andmarket-leading consumer insight. Don’t hesitate to contact PSI today to discuss this new world of opportunity: www.psiad.com

LONDONPSI2nd Floor, The Qube,90 Whitfield Street,London, W1T 4EZ

T: +44 20 7336 6363E: robin.hall@psiad.com

We are passionate about delivering inventive, engaging OOH solutions across the world’s airports and cities. Our strategic partnership with ForwardKeys is a significant asset in our armoury for understanding how best to reach the world’s increasingly mobile audiences.

James McEwan, Deputy Managing Director, PSI