China's Economy: Four Dishes and One Soup
By Matthew Costin Global Director (Hotels & Hospitality), BDRC Continental | January 12, 2014
President Xi Jinping's famous phrase encouraging restraint in Chinese government spending has had some effect. However, the recent rise in China's GDP has been driven by increased infrastructure spend, not domestic demand. China's civil servants might be enjoying fewer banquets and hotel stays but they're having trouble cutting back on the bridges and railways.
This may in the medium term be bad news for China's economy, which leading economists judge as in need of rebalancing. In the Chinese hotel and travel market, a rise in international business travel has been balanced by a fall in domestic business travel volumes and participation this year, down a painful 8% to 1,971 million room nights. However, hoteliers are taking some comfort in the growth of leisure travel, fuelled by the continued growth in prosperity among metropolitan Chinese. The increase was not huge though – 201 million participating adults (+4%) accounting for 1,993 million room nights (+3%). Most stays are short breaks, of course, up 12% at the expense of longer stays. All those new railways and bridges will help people to move around as well as goods, so continued growth in the domestic hotels market is a safe call. With more money and more places to get to, Chinese consumers will be visiting more of their vast country (larger than continental USA).
International (outbound) business volumes are up, perhaps because of the drive for exports – or maybe all those minerals joint ventures in developing countries take a lot of managing. Chinese business travelers are certainly spending more time abroad; +20%, up to 314 million room nights. The profits from Chinese economic growth are being spent by many more international leisure travelers, renowned as enthusiastic shoppers. All those Gen X/Y girls who grew up with the Spice Girls' consumerist anthem "I tell you what I want, what I really, really want" are living the dream now! 7 million extra last year, up 22% to 39 million travelers – more than the whole population of California – staying for 762 million room nights. Mostly they stay in Asia Pacific, with Hong Kong, Australia, Japan, Singapore and South Korea the main destinations. Slightly fewer than 1 in 5 Chinese leisure travelers claim to have spent a 5+ night stay in the USA in the last year, the same proportion for Western Europe. For Western governments, tourist boards and hotel operators, driving up this number must clearly remain a priority.
Shangri-La remains No. 1 ranked brand, though Hilton took their No. 1 Leisure Brand crown. Most improved brand is Ibis, seeing increased awareness and customer recommendation. The most widely used brand in China, 7 Days Inn, improved its overall brand ranking from 5th to 3rd, with Home Inns moving up fast behind it from 9th to 5th. Hanting Inns and Hotels joined the top 10 brands overall this year while in Jiang Hotels returned to the Top 10 with improved loyalty and recommendations. Talking of which, what are the dominant emotional drivers for Chinese travellers? Both business and leisure expect their rooms to be comfortable and trustworthy as well as wanting a great night's sleep. These functional drivers point towards a focus for operators on the bedroom environment, though you wonder if the relentless pace of urban construction has habituated too many travelers to having nights broken by construction noise – something beyond the control of most operators.
How Do the Chinese Book Their Stays?
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