7 July 2017

Make Way for the Millennials

It comes to no surprise that the sheer volume and growth of Chinese overseas travel continues to surpass all expectations. The number of outbound Chinese tourists will roughly double within the next decade from 120mn in 2015 to 220mn in 2025. Those tourists spent over $29bn overall in 2015, making them the worlds largest and highest spending group of travelers.

Over the next decade, this travel frenzy will be fueled by several shifts in demographics and urbanization. Chinas population will become more affluent, transforming the country into an upper middle-class society. In 2012, Chinas upper middle-class represented roughly 14% of total urban households and by 2022, it is expected to represent over half. This upper middle-class is defined as having roughly $20-35k annual disposable income per urban household and this increasing affordability means that international travel will now become more accessible for Chinese households. Combine this with the fact that currently only 4% of Chinas population hold a passport comparative to Thailand at 15%, Japan at 25% and the US at 35%, and only 16% of Chinas outbound trips represents total households’ comparative to Thailand at 50% and South Korea at 131%, there is plenty of upside and ample room to grow for Chinese outbound tourism.  

Millennials at the forefront of this boom, represent a new wave of Chinese travelers. They are more educated, with over 70% of travelling millennials having at least a bachelors degree compared to only 46.3% of Chinese outbound tourists overall. They spend the highest proportion of their annual personal income on travel expenses at 27% and they are more connected with one another with over 75% of millennials relying on social media and online travel agencies to research and book their travel plans. This trend has led to the rise of influencers or bloggers who are paid to travel and post about their experiences online. A recent example of the impact entertainment has had on tourism could be examined with the film Lost in Thailand. Lost in Thailand quickly became the number one film of 2012 in China and is credited with contributing to the tourism boom in Thailand in early 2013. The tech-savvy millennials represent over 60% of all Chinese travelers and will continue to represent an even bigger share fueled by 74mn Chinese college grads set to graduate within the next 10 years.

Thailand will be the undeniable beneficiary of this tourism boom as at least 7% of all Chinese outbound tourists will be travelling to Thailand, doubling from 7.9m in 2015 to 16m in 2020. Out of all Chinese outbound destinations, Thailand has the second highest 5 Yr CAGR of 38% suggesting Thailand as a high demand destination among Chinese tourists. Thailand represents a value for money, short haul destination, within the proximity of four hours from China, enhanced by the development of low cost carriers with the ease of obtaining visas on arrival, a great mix of urban shopping and natural beauty, and cultural and ethnic similarities. Chinese travelers to Thailand has increased over the past five years representing 9% of total inbound tourists in 2011 to representing 27% in 2016. Coupled with higher spending power, this group of travelers also spends the most in Thailand representing 27% of total income from inbound tourists by country in 2015 with a 3 Yr CAGR of 54%. The characteristics of Chinese tourists visiting Thailand are changing as well as more millennials are coming and staying for longer (8 days on average) and a shift towards more independent frequent travel (over group traveling and first-time travelers). Although Chinese spending in Thailand is still mostly dominated by shopping, in 2015 the growth rate of shopping vs. entertainment were equal at 10% suggesting a shift in consumption patterns towards more experience based travel.

The rapid expansion and substantial economic growth of China is driving a population eager to spend more so on travelling. The first truly global generation seeks individualized authenticity in their experiences and the ability to share their travels online. The new age traveler is younger, richer, more educated and more reliant on technology and social media to discover and plan out destinations. With such a shift in the mindset of the majority of Chinese travelers, Thailand among other countries eager to benefit from this travel ready group must also adapt their tourism campaigns as a world becoming more global will result in more intensified international competition in the form of easing visa restrictions/promotions/etc. Though all countries will surely benefit from this upcoming trend, who will come out on top is uncertain. The one thing we can say however, is that the Chinese tourism boom is real and millennials are leading the way.

By: Chanitnun Nongsuwan July 7rd 2017