Retail Marketers Aren’t Prepared for Flood of Affluent Chinese Tourists

Global hotel chains, airlines and luxury retailers can expect tens of millions of new customers from China in the coming years, but few Western companies are prepared for this influx or have a clear understanding of exactly what Chinese tourists require and expect for their yuan.

The growing number of affluent Chinese travelers “will completely change the face of tourism,” especially in hot destinations such as New York, Las Vegas, London and Paris, said Pierre Gervois, CEO of China Elite Focus, which specializes in affluent Chinese outbound tourism. “There will be an influx of wealthy travelers.”

China will overtake Japan as the world’s second-biggest tourism market by 2013. Sixty-six million Chinese will travel overseas this year — a 15% increase over 2010 — and that number is expected to reach 100 million by 2020, according to the World Tourism Organization.

Just a few years ago, few Chinese went further than shopping excursions to Hong Kong or gambling junkets to Macau organized by budget tour group operators. Today, Chinese tourists are more likely to be affluent independent travelers looking for customized experiences along with the comforts of home.

“Everyone stands to benefit because the Chinese market is growing so fast,” said Bruce Ryde, general manager of InterContinental Hotels’ Hotel Indigo Shanghai on the Bund, who appeared on this week’s episode of “Thoughtful China,” a video program produced in China.

But the global travel and tourism industry doesn’t understand these travelers yet. “The biggest issue is language,” Mr. Ryde said. “The Chinese traveler appreciates and needs a certain amount of translation [when] it comes to menus, hotel information and just general conversation. There needs to be some preparation.”

“The most important thing the hotels need to be thinking about is understanding and tapping into the cultural differences, and ensuring they understand what’s important to Chinese travelers,” said Gary Rosen, who recently resigned as senior VP and head of global operations for InterContinental Hotels Group.

Some hotel and retail chains have started to tap into this market. This summer both Hilton and Starwood introduced touches aimed at Chinese travelers such as stocking instant noodles, Chinese teas and tea kettles in mini-bars, offering Chinese TV channels and slippers in guest rooms, and serving congee (hot rice porridge) and dim sum at breakfast.

pierre-gervois- China Elite FocusFood is especially important. Don’t be surprised, Mr. Gervois said, if Chinese tourists, both rich and poor, prefer instant noodles in the room over local cuisine.

Hilton and Starwood have also translated corporate websites, welcome letters and local sightseeing information into Chinese and hired dedicated front desk staff fluent in Mandarin.

The goal is to make them feel at home the same way Western hotel chains cater to Western travelers in Asia, said P.T. Black, “Thoughtful China’s” senior creative director in Shanghai. “If a hotel can provide Americans with a hamburger in Hanoi, then Chinese should get noodles in Nice.”

Luxury retailers and top tourism destinations such as the Louvre in Paris have followed suit. Many Chinese still don’t have Western credit cards, for example, so Harrods in London brought in 75 UnionPay machines “so Chinese can use their own local cards to get money out,” said Chloe Reuter, a luxury retail specialist based in Shanghai.

While Western companies struggle to adapt to Chinese travelers, Asian firms are trying to expand, such as Hong Kong-based Shangri-la Hotels & Resorts, which recently opened a five-star property in Paris.

“All the luxury hotels in Paris are really worried,” Mr. Gervois said. Their owners realize Shangri-la “knows exactly how to talk to wealthy Chinese travelers, what kind of food they expect, what kind of service they expect. I think Chinese brands with a lot of quality and content will really have big success expanding abroad.”

Foreign companies should also be working harder to provide online product information and reservation options in China, which has over 400 million internet users, Ms. Reuter said. There’s a missed opportunity for a global travel portal that curates news and information, she said. “Chinese spend hours, if not days, searching for information about where they want to go [but] no one is telling people, here’s your Chinese-language app for where you need to go shopping in Paris.”

Normandy Madden is senior VP-content development, Asia/Pacific at Thoughtful China, and Ad Age’s former Asia editor. See earlier episodes of Thoughtful China here.

Affluent Chinese shoppers love Tiffany’s NYC legendary store

Jewellery-hungry Chinese tourists fuelled a surge in US sales at Tiffany this summer, helping the luxury retailer produce robust second quarter profits in spite of a weak economic backdrop.
Tiffany raised its annual earnings outlook on Friday as customers shrugged off economic concerns and continued to purchase its luxury items. The company’s second-quarter performance exceeded the expectations of Wall Street analysts and its shares jumped 7.51 per cent to $67.85 in early trading in New York.
“We are extremely pleased by these results which confirm the growing global appeal of Tiffany’s product offerings,” Michael Kowalski, Tiffany chief executive, said. “We have been able to absorb precious metal and gemstone cost increases while improving our gross and operating margins.”
Outside the US, fears about weak demand were unjustified. Sales in Japan, which was battered by an earthquake and tsunami in March, rose 21 per cent from a year ago. Europe, where many consumers have been hit by government spending cuts, also showed strong growth with sales climbing 32 per cent.
Sales in the Americas rose 25 per cent from a year ago, while sales in Asia were up 55 per cent .
In the US, Tiffany said that more than half of the sales increase was due to increased spending by foreign travellers, led by Chinese tourists. Sales of items priced above $20,000 and $50,000 showed “notable strength”, the company said.
“We were bracing for pockets of weakness, little indications of the macro story coming home to roost in a retailer than has been on fire for longer than a year,” said Brian Sozzi, retail analyst at Wall Street Strategies. “At the moment, we are hard pressed to find negative aspects to the quarter, only a bunch of interesting positives.”
“We  have monitored the needs of wealthy Chinese tourists in the U.S. for the last two years and the first items they buy during their leisure trip in the U.S. are high end jewels and watches. This is a very good news for the American luxury retail industry”, said Pierre Gervois, CEO of China Elite Focus.
Paul Lejuez, retail analyst at Nomura, said that the 41 per cent year-on-year sales increase at Tiffany’s flagship store in New York was the largest since 1990, when he began tracking the company. Calling their sales “off the charts”, he said that Tiffany, which operates 236 stores around the world, could probably increase its prices further without suffering a significant sales slowdown.
“There certainly are a lot of people out there with a lot of money who are looking to spend it,” Mr Lejuez said. “People look at their merchandise as having some innate value, and that goes a long way.”
“Despite continuing economic uncertainty, our strong first-half performance gives us ample reason to remain confident about our prospects for the balance of the year,” Mr Kowalski said.

Source: Chinese tourists in America / Financial Times