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China’s Outbound Travel Market soon accessible to WFOEs

Posted by: Kristina Knut
Category: Business in China, Economy & Trade

Beijing proposed to further open the local travel market by allowing WFOEs to provide outbound travel services

The Chinese travel market is booming – more and more Chinese travelers prefer to spend their holidays abroad. While the beginning of the new millennium saw a demure amount of 10.5 million overseas trips made by Chinese residents, this number has only gone up ever since, totaling to about 130.5 million trips in 2017. This is a whopping 1380 per cent rise in 17 years and the forecasts for 2018 look just as positive.

Take a look at some of our previous posts: Singles Day – a Chinese shopping day bigger than Black Friday

A growing demand

It took China less than two decades to become one of the most powerful outbound markets for tourism, spending a whopping $258 billion on international tourism in 2017, as the United Nations World Tourism Organization’s report “The UNWTO Tourism Highlights 2018 Edition” announced. With the increasing number of tourists and their travel-related spending expected to rise, there is a growing demand for international travel.  The Chinese travel market is vast and lucrative, raking in new record amounts each year. Accordingly, the news of Beijing planning to open up their tourism industry comes at an excellent time.

Positive changes ahead

Once the document has been approved, selected foreign agencies meeting the prescribed requirements may take Chinese visitors on outbound travel. Fully foreign-owned travel agencies have been operating on the Chinese market since 2003, but with major restrictions. Until now, foreign companies had a chance to form joint ventures with Chinese owned companies, which consequently allowed them to offer outbound travels. Such is the case of the UK-based agency Thomas Cook and a Hainan company Fosun Tourism Group, which had formed a JV. While WFOEs are often the preference for many businesses in China, the local regulations restrict them from operating independently in certain industries (such as tourism) and require having a local partner. This would be the first time where these agencies would be allowed to promote and sell outbound travel services.

The new policy will initially be implemented in Beijing and would likely be gradually rolled out in other major Chinese cities soon after.

Beijing officials are welcoming these updated policies with a positive tone, as the Chinese travel market, growing with a speed of 10 per cent annually, is big enough for more agencies. The online travel businesses operate at an even higher growth rate of 35 to 40 percent annually, with major players being Ctrip, Fliggy and Tuniu.

Where are Chinese tourists traveling?

With so many annual trips made, one comes to wonder – what are some of the most favored travel destinations for Chinese tourists? Taking the 130.5 million outbound trips apart, one will understand that the number is a bit misleading. The number also included trips to the special administrative regions of China, such as Hong Kong, Macau and Taiwan. These regions alone accounted to a total of 69.5 million „overseas“ trips in 2017. Other popular destinations in Asia include Thailand, Japan, Vietnam and South Korea.

Vast opportunities within the Domestic Travel

It’s hard to predict how foreign travel agencies can compete with companies such as Fliggy by Alibaba or Ctrip, which currently dominate the market. However, considering the size of the Chinese market, there are definitely some new stand-out services and travel products which the WFOEs could offer to reach new untapped consumer demographics. With access to the Chinese market, foreign-owned companies will have a chance to market more niche destinations. These could be places previously unknown or inaccessible to the Chinese travelers, aimed at the more adventurous segment.

While China is the world’s largest outbound tourism source market, its international tourism spending is far behind domestic tourist spending. As the Chinese Tourism Academy (CTA) and Ctrip reported, Chinese tourists spent a total of $115.29 billion on outbound travel during 2017. With an increase in trips and spending, the domestic tourism industry raked in $720 billion, with 5 billion domestic trips. Thus, in anticipation of the new regulation, why not take advantage of the vast domestic travel market in the meanwhile?

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Author: Kristina Knut

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