Time to reconnect with China: why and how
Bad news first
Before the Covid pandemic disrupted global travel, China was well established as the biggest tourism source market in the world, with an accumulated 155 million outbound trips and a spend of USD 250 billion in 2019. No other market even came close. Chinese travellers were highly sought after, either for their sheer numbers or for their high travel spend. Sometimes both.
The strict pandemic controls in China hit the local travel industry very hard. This was especially true for the outbound travel industry, which was essentially forced to halt its international business completely.
The industry had to survive by reducing operational costs dramatically while looking for alternative revenue streams, for example, by switching operations to the domestic Chinese market. Since domestic and international travel are traditionally two separate worlds in China – even when operated under the same umbrella company – the outbound industry faced stiff local competition.
Having lost their key advantage, international agencies were forced to make do with the new circumstances to at least preserve their key staff and networks. What made matters worse for them was the lack of clear timeframe on when and how China might open up for international travel again.
The whole market suffered, from tour operators to travel media, airlines to visa centres. Everyone slashed operations to a bare minimum. In the outbound travel industry, the situation was so difficult that some industry players were forced to accept mergers, switch to domestic travel or develop completely new business fields, such as tax-free retail, just to survive.
Large numbers of staff had their hours reduced, then were laid off completely, many were forced to find new income to make ends meet – and many left the travel industry for good. This resulted in a huge loss of operational know-how and experience and disrupted supply chains and connections with partners abroad.
Over time, it became evident the market would not simply restart after the pandemic; it would have to evolve into something new. The Chinese outbound travel industry went on hold, into hibernation.
Now to the good news
With the policy changes at the end of 2022, first for general pandemic control, then specifically for travel, hope returned for China opening up again. Hibernation was coming to an end and business could restart.
The external bottlenecks the industry faced on its road to recovery mostly concerned lack of capacity: hotel rooms were long since booked and or very expensive, international flight connections were still down, embassies could not handle larger volumes of visa applications. But while at the beginning of 2023, China’s international flight connectivity was between 8% and 10%, by the end of the year, it had recovered to around 60%. This increase in capacity was mostly down to Chinese airlines, who expanded their network, but a full recovery needs international carriers too. Unfortunately, geopolitics influence flight recovery, with the crisis in the Middle East and the conflict in Ukraine forcing foreign airlines to avoid certain airspace, increasing travel time, operational costs and ticket prices.
Nonetheless, by summer 2023, most industry key players were back in operation – for the Chinese outbound travel industry to power out of hibernation in just six months was remarkable, but it also led some observers and media outlets to raise unrealistic expectations, predicting huge arrival numbers of Chinese travellers and a return to 2019 levels within the year. But disappointment and negativity arrived.
Anyone with real insight into the market knew it would take time and effort to rebuild the industry, to repair and realign the crucial components of a complicated and delicate machine until it could run smoothly and at full power again.
Apart from the supply side of the market, there is also the often somewhat overlooked demand side: What is the Chinese post-Covid consumer sentiment? Have traveller values and priorities changed? How and to what extent have consumption and travel preferences evolved? Will recent trends in domestic travel inform outbound travel?
Now the pandemic is officially over, the travel industry needs to instil confidence in Chinese travellers and show them a trip abroad is safe and controllable, that overseas visitors are welcome again. This also means product design and promotion must adapt to the post-Covid needs and interests. The good news is much of that recovery happened in 2023 and 2024 will be about growth.
China has just enjoyed its first Spring Festival without pandemic restrictions, supported by a recovered local travel industry, and it seems the market has come close or even surpassed this period’s 2019 levels. This truly is an encouraging signal both for the Chinese and global tourism industry – it gives reason for optimism for 2024 and beyond.
So why now?
There has been much talk about China’s economic slowdown, but it is important to remember that consumers who travelled internationally in the past 20 years are mid- to high earners. As in any economy, those with disposable income and wealth are more likely to weather the storm. Their spending power is very much intact. While travel is not a necessity, over the last two decades, it evolved from being a luxury to being a normal part of Chinese modern or urban life – even a commodity.
People who travel abroad regularly know what they like and have quite high expectations, which has pushed the international markets to respond, creating experiences far beyond the notorious low-budget group roundtrip. The Chinese travel market is increasingly diverse, with products tailored to business and leisure, luxury to affordable, general to special interest.
This trend emerged before 2019 but the pandemic made it stronger, and if the Chinese domestic travel market is any indication, this is indeed a long-term evolution, one which presents many new business opportunities.
New impulses and opportunities appeared in 2023, and now, in 2024, the market seems stable enough for suppliers to reach out again and start positioning brands and products. This is a window of opportunity, a chance to make new connections, build new relationships and get a foot back in the door.
Travel agencies may have changed or extended their business fields and require new products and supplier resources. Longstanding contacts might have moved up in the company hierarchy, new joiners to a business might have few pre-conceptions – all are opportunities for your offer. Pole-position competitors of three years ago may have changed during the pandemic, shifting the landscape. This could be your chance to step into their shoes.
Tourism is notorious for its long planning cycles, so while 2024 has big sales potential, this year is even more crucial for successfully positioning your brand and products in the market, to reap the strategic benefits later.
One thing is for sure - no global marketing strategy can be complete without seriously evaluating the number 1 source market.
How to do that?
Developing your business in the Chinese outbound travel market poses certain challenges:
This is an emerging market with huge growth potential, very likely to soon regain its position as number one global source market. Since the market is evolving quickly, it constantly produces new trends and product needs, creating untapped business opportunities. Also, at least in some sectors, there are already clear signs the Chinese travel industry has entered a phase of diversification and maturing, promising potential for higher quality products beyond low-cost mass travel. But any international tourism supplier, brand or destination has to at least consider engaging the Chinese market.
Marketers and salespeople, though, find this market challenging because of its distance, time difference, market size, language and intercultural differences. Additionally, it takes time to develop business networks and build trustful relations, create a name for yourself and your product and to develop sufficient insights and knowledge. It is also wise to get an understanding of who is who in the industry and how to monitor and assess the market’s evolution.
Here, I share tips and practical guidance gathered during my 20-plus years of on-the-ground experience as a sales representative in the Chinese outbound travel market.
Getting prepared
The long hibernation caused by the Covid pandemic fundamentally disrupted the Chinese outbound market. Any pre-pandemic databases are likely outdated, and many former contacts might no longer be viable. Some contacts may work in new positions, some may have changed companies and many have left the industry for good. A good 30 to 50% of contacts are likely gone.
If a contact is outdated but still reachable, ask to be referred to a new contact, if that’s appropriate – a decision that depends on how close your relationship is. If a contact does not reply or seems unwilling to help, do not push it – be sensitive to their current situation and the circumstances under which they left their last employer.
If you are a newcomer to the market, it will take you a while to build your contact database and the relationships that need to go with it. Take a conservative approach to your strategy – a two-year timeframe is reasonable for establishing a workable network.
Keep in mind, also, the sheer size of China and its regional differences. What is interesting to a travel agent in the north may be less interesting to an agent in the south. Make your first sales steps in first-tier cities – Beijing, Shanghai and Guangzhou – or the more mature markets of Hong Kong and Taipei, before expanding into other cities and regions. Think of China as a continent rather than a single country. There are huge regional differences in geography, climate, even dialect that inform lifestyle and preferences. Like the different habits and needs someone from Stockholm has over someone from Athens, the lifestyle of a Beijinger differs from that of a Shanghainese. You should not expect to conquer such a huge market in one go and with a one size fits all approach. Your strategy will likely need to be flexible and evolve with the market, so you need enough time and opportunity to learn.
You should also adapt your strategy to your offer. For niche products and themes, consider local markets and agents that cater to very specific target groups and communities. Knowing your product and your target segment can save you a lot of time and money.
To speed things up, you might invest time and money in joining some established B2B platforms, such as roadshows organised by national tourist boards or workshops and trade fairs held in the market by other organisations. If the event is well organised and the contacts are curated selectively, you will gain market knowledge and business contacts in a relatively short time.
As the Chinese outbound travel industry is rebuilding, your contacts will definitely need new suppliers and product resources, ideally in Chinese and adapted to the market. Since the post-pandemic market has evolved, you could introduce completely new products that received little or no interest in the past. Even older products need to be re-introduced to cover the loss of product knowledge caused by the hibernation and industry disruption.
If you can reach an established contact, a simple reminder or update might suffice, but assume their last reference point was pre-pandemic, so your latest prices, capacities or business policies may differ to previous conditions now no longer on the table. Buyers are rebuilding their business, probably with financial constraints and limited cash flow, so they may ask for very lenient payment terms and cancellation policies. Sales partners are experimenting as they adapt to the many changes in the market and identify current demand – not every idea and project will take off.
Finally, remember those external factors – visas and flight capacities – beyond your sales partner’s control have a strong and direct influence on the industry and business. While there are improvements, they are still below 2019 levels, which creates uncertainties and makes things hard to predict.
Engaging the market - DIY
To engage the market alone, do your homework and consider a few fundamental questions. The better you know the market and refine your goals, capacities and limitations, the more likely you will plan a successful strategy, design attractive products and communicate with contacts successfully.
- What is your outlook on this market? Is it of strategic value to you or are you looking for quick short-term gains?
- What is the status of fundamentals such as visa handling, flight connections, cross-border payment systems?
- What is your specific motivation to develop this market? Is it to diversify and hedge your source markets or are you simply looking for additional sales in low seasons?
- Does your company or destination actually welcome guests from China, and which kind?
- Do you require external help and training on the product side? Do you need local partners or stakeholders on board first?
- Will your target guests from China fit with your existing clientele, or do you need to manage and steer this process?
- How suitable is your product for this market and to what extent could you adapt it, if needed?
- How known and visible is your brand and how is it perceived?
- What market do you hope to be in? A mass or a high-end market? Or should you consider a niche segment with very specific needs, such as education or special interest?
- Do you have enough time and resources to try out things and learn from mistakes to adapt and improve your offer?
Whether you are an old hand in China or a newcomer, learning about the market and following its development is crucial but challenging. While a lot of relevant information is published in Chinese only, there are English resources sharing insight and observations of the market. The national tourist boards usually provide at least some rudimentary market information, and there are many industry associations and international market research organisations with China market experts you can follow or consult.
Media outlets that publish news about the Chinese market give a better picture and a deeper understanding of what is happening in China and its travel industry. I find these outlets helpful to follow:
Travel industry media
General news media
Lifestyle media
Learning about China and its culture will definitely enhance your understanding of its people and the market. The intercultural elements are indeed very important and pose quite a challenge, but there is no need to strive for perfection, neither in language nor cultural knowledge. Your Chinese partners appreciate your efforts and small gestures. In my two-plus decades embedded in the market, I have always found my Chinese counterparts very approachable and easy-going. Only in formal settings are there more rigid customs to observe. In my experience, there is very little that cannot be resolved with general politeness, common sense and attentiveness, so don’t let cultural differences put you off.
One of the biggest advantages of working in the Chinese outbound travel market alone is building relationships directly and getting unfiltered feedback. But you also need to regularly maintain and support those relationships, which can be a challenge, given the physical and cultural distances, time and language differences. Be aware when your contact visits you, you should reciprocate the hospitality and help you receive in China.
Communicating with your contacts can be a challenge for technical reasons too, since China has its own digital ecosystem, and many services you use – search engines, payment tools, location services, international websites – do not exist in China. Without them and not having the Chinese alternative can make business challenging, as your Chinese business contacts are likely to prefer to use their own local systems and platforms.
The Chinese WeChat app is a prominent example. This super app is used for nearly everything in daily life across Mainland China. Despite phone and email still being used in China, most communication, both business and personal, is by WeChat: voice calls, video meetings, file transfers, location sharing, contact sharing. Hong Kong and Taiwan differ a little since international platforms are more accessible, so, there, you might also be able to use Whatsapp, Line and other services.
In business dealings in Mainland China, it is now common practice to exchange WeChat contacts rather than business cards. If you want to engage your contacts directly, in practice there is no way around WeChat, so familiarise yourself with its functions, upload a digital version of your business card to your phone and decide how you will organise and structure your WeChat contacts, so you know who is who and how you met.
Consider using a travel agency or hotel concierge to help you arrange some elements of your trip, but if you’re set in planning your sales trip alone ensure you do your research. A business trip to China is complex, and that research definitely pays off when you know where you’re going and what to expect. It seems obvious, but China is a huge country, so you could well get on a plane in Beijing at 10 degrees and arrive to 25 degrees in Hong Kong.
Plan your route to your contact’s office and know who to ask for when you arrive. Work out how to arrange your sales tour and transport efficiently – you can waste a lot of precious time if your routing is not well thought out. Also consider
- how you communicate during your business trip
- how you book and pay
- what materials, presents and giveaways to take and what digital options you could use to reduce weight
Using a representative
You might decide to use an agency or representative to engage the market. It has its pros and cons. Doing so may save you time, energy and money because you will not have to travel to China so often, and you can benefit from an agency or representative’s contacts, experience, know-how and market insights. It removes all challenges you’d face alone. Instead, you can outsource most problems and focus your energy on the results, ensuring a more targeted and efficient mission.
Obviously you need a budget and a competent, trustworthy agency you feel you could work with for a long period – changing agency down the road would cause serious disruption for you in an already challenging market. Your market representative acts as your face and voice in the market and obviously needs to know your product inside and out, to identify business leads and present and negotiate on your behalf.
In my experience, mutual understanding and – above all – trust are most crucial. Only if there is trust can you give your representative the operational freedom they need. After all, why hire an expert if you don’t trust their expertise? They may need to adapt products, change strategies, even make mistakes, so the relationship between you and your representative must be clear and strong, so any setbacks still keep you on a successful path.
There are many agencies, so in assessing and selecting a suitable one for you, I recommend exploring the following questions in making your decision.
- Do you have a trusted independent to help you assess the agency?
- How long has the agency been active in the market and in what capacity?
- How much experience does the representative have in the outbound travel industry?
- What is their reputation, i.e. are they a speaker, expert or content publisher?
- Would you merely be one of many client accounts for the agency?
- How focused and loyal would they be when negotiating on your behalf?
- What client references and track record do they have?
- How long have their clients worked with them?
- Which of their networks, databases and tools can you profit from?
- Did they remain active during the pandemic and maintain useful databases?
- How experienced and qualified is the agency team?
- How well does the agency know or understand your product or comparable ones?
- Have agency representatives experienced your product themselves?
- Can the agency forge synergies between you and other clients?
Ultimately, you need an agency that works for you, one that provides the level of quality you expect, the support and input you need, a relationship with your contact person that suits – and pricing that fits your budget.
The Chinese outbound market is back in business, and as a crucial strategic source market, it is important you get some insight as you evaluate its business potential for you. If you decide to develop the market, engaging it by yourself or through a representative both have their advantages and disadvantages. You need to decide which approach most appeals, and I hope the tips and considerations here will help.
Summary
Pent up demand and revenge travel were the buzzwords of 2023, but they created unrealistic expectations and consequent disappointment about the speed of the Chinese outbound market recovery.
Yes, if a consumer was limited to domestic travel and had no real opportunity to travel abroad for nearly three years, it is very likely they would want to travel again, but that does not mean ‘any’ international trip would do, post-Covid, or that the market would simply reset to 2019. It is much more likely Chinese consumers’ domestic travel experiences will inform their preferences in international travel – and these will be different to before.
In 2024, we will, I believe, see to what extent this is true, whether and how the market has evolved, and what its long-term strategic potential is. There has been much speculation about when the market would return to pre-pandemic levels, in 2024, 2025 or later. But surely, it is a moot point that misses the point: the Chinese market is clearly back in business.
And excitingly, the Chinese international travel market is still emerging. What we have seen so far is merely the tip of the iceberg. Only around 8 to 10% of Chinese citizens currently have a passport to travel internationally, a tiny percentage compared to other major countries. As more consider international travel an option, the growing interest and excitement we have seen in global tourism over the last two decades can only increase.
Despite current economic challenges, the fundamentals of the market – flights, visas, demand – are improving fast. There is a sense that this is the moment to engage with the market and develop business from China. This is the time to reconnect.
