Professor Jim Deegan
Head, Department of Economics
& Director, National Centre For Tourism Policy Studies
University Of Limerick.
WEB CHECK DIGITAL CONFERENCE: NOV 1 2012
RADISSON BLU HOTEL , LIMERICK
BEGINNING OUR UNDERSTANDING OF CHINA
1. China is a massive Country and borders 14 other countries- more than any other
Country in the world.
2. Country is made up of 56 Ethnic groups with Han Chinese dominating with 92% of
the population. Mandarin language dominates but Cantonese is also important.
Mandarin has 40,000 characters so not easy to learn.
3. One of oldest civilisations in the world and until last century one of the most
prominent and successful: some great scientific and other achievements-the
great wall is 4000 miles long; the invention of printing, paper, gunpowder and the
compass.
4. China is officially an Atheist Country and the dominant cultural identity and action
is shaped by (a) Confucianism; (b) Buddhism and (Taoism). Also an ethnic and
important Muslim population dating back to old trading routes.
5. Personal and business relationships and actions are dominated by the above
philosophies.
THE ONE CHILD POLICY IMPACTS MANY
ACTIONS AND UNDERSTANDING THIS IS VITAL
1. Introduced in 1979 to control population growth.
2. Result: Emergence of “Little Emperors”-self centred consumers and strong link to
family behaviour. One child to eventually support 2 parents and 4 grandparents.
Now there are 120 boys for 100 girls. Family is a central force to all decisionmaking in China.
3. The educational system is grinding and “fact driven”. From Confucianism
students do not challenge and this has significant implications.
4. With growing wealth and unhappiness with the pressures of the system the
wealthier are increasingly sending the “Liittle Emperors” and their female
counterparts to study overseas not just for University but also for secondary
school.
CULTURAL ISSUES THAT ARE VITAL: CORE
CONCEPTS (1) “FACE”
1. Face-
loosely described as social status in China is vital for all behaviour(s).
For a Chinese person one’s reputation must be maintained and enhanced
throughout life.
2. Without “Face” a person has little power or influence. For example, staying in the
wrong hotel will not be commented upon but will end any chance of a business
deal for you.
3. To contribute to someone losing “Face” is a massive dishonour and will most
likely end a relationship and this can happen innocently.
CONCEPT 2: GUANXI
Guanxi-
meaning “relationships” is a key concept to understand.
Essentially the exchange of favours and most similar to the idea of
“networks” in western countries.
Relationships between family/relatives and business
associates are closely interwoven.
Doing business frequently requires that the wheels of motion are
greased. Strongly linked to Chinese tradition of “gift giving” that also
fuels shopping and is linked to “Face”. In such an environment
corruption can flourish.
CONCEPT 3: THE DOCTRINE OF THE MEANZHONG YONG
1. From Cunfucian philosophy and teaching what is to be prized is “Conformity and
Harmony”-the ideal way of living. This means that a slow pace is prized.
2. Chinese people can not be seen to be lazy but also a cardinal sin to be seen to
be openly ambitious. Success determined by society not self.
3. Chinese people will never openly criticise, ignore or make fun of a person. They
will always emphasise good points before any mention of bad points.
4. Often at a business meeting only the most senior executive will speak. It is vital to
understand that silence is not a sign of weakness.
SOME DIFFERENCES TO NOTE
1. If a Chinese person asks you very personal questions about your age,
appearance, income, religion or marital status do not be offended or take it
personally.
2. Rarely do Chinese people use please or thank you as this is seen as
unnecessarily formal.
3. At meals do not be surprised by Chinese spitting out bones and not conforming to
your notion of good etiquette-this is normal if challenging.
4. It is normal in China not to discuss any business at all until after you have had a
meal or meals with your Chinese counterpart(s). Get used to it or you will not
make headway.
5. It is normal to drink a lot at meals and you will be expected to keep up with the
pace. You are better to not indulge at all than failing to keep up. Remember the
Chinese will say nothing but you will be out of the game.
THE SLEEPING GIANT AWAKES: DENG XIAOPING
1. Allows Market Forces To Set Prices –dismantles the “Iron Rice Bowl” of State
Incursion to All Economic Activities. Painful and 70 million lost jobs.
2. Massive Infrastructural investment to increase productive capacity and major
agricultural reforms unleashed massive migration to the Cities.
3. Embraced greater Trade through joining World Trade Organisation
4. Massive investment in education-catching up period after Mao’s Cultural
Revolution.
5. Private Property Rights spawned massive growth in Home Ownership.
THE OUTCOME WE HAVE SEEN: VITAL TO
UNDERSTAND THAT THIS IS VERY SUDDEN
1. China now the second biggest economy in the world but remember still only 40% of US
GDP.
2. China now the world’s manufacturing powerhouse.
3. Over the medium term the value of the Renmimbi looks set to appreciate.
4. China again taking its place as a major player in the world-The Chinese are quietly
confident and increasingly so about this. Remember, in the current environment the
Chinese have many suitors.
5. China is modernising but it is not becoming Western.
6. China has historically been a very unequal society but the biggest change unleashed
by Deng Xiaoping is a an unprecedented march and development of a “middle class”
in China. This is why the Chinese people have generally been happy with the ruling
party.
7. Estimated that from 2010 to 2020 annual average incomes will increase from 4400
dollars to 12,300.
THE TOURISM DIMENSION: THE LADDER OF
DEVELOPMENT.
1. Today, fewer than 200 million Chinese consumers have taken an overnight
leisure trip. An average of 25 million new people taking a trip each year so the
number will double by 2020. Two thirds of these people will reside in the non Tier
One Cities.
2. By 2020 there will be nearly 800 urban locations where real disposable income
will be greater than Shanghai today-these locations are less competitive now and
ideal for a “First Mover Advantage”
3. China’s Travel Industry is still in its infancy-a highly regulated sector and
challenging for foreign players. Intense competition with little innovation or
differentiation of product or service offerings-REMEMBER THIS IS ALL NEW.
4. Only a handful of companies understand the market well and 95% of Chinese
Travellers claim they are poorly served.
THE OUTBOUND MARKET FROM CHINA
Year020
Outbound Numbers-Millions
1995
7
2000
10
2003
20
2005
31
2010
57
2012
80(est)
2020
100
WHERE DO THEY GO?
1. More than two thirds go to Hong Kong or Macau but increasingly venturing to
other parts of Asia and to “long haul” destinations-(more than 6 hours flying).
2. As real incomes grow it is forecast that circa 20 million trips will be made to long
haul destinations in 2020.
3. Arrivals to Europe estimated to be 3 million in 2011 and to be 12 million by 2020.
SOME CRUDE PROFILING: THE INEXPERIENCED
TRAVELLERS
1. Inexperienced Travellers: First to domestic travel within the region and then to
more distant parts of China-then to Hong Kong or Macau and then to Long Haul.
2. Most Chinese Travellers are in early part of this process and language barrier
dictates the game. They will need to have at least one Chinese meal a day.
3. This segment is enormous-70% of domestic travel and 77% of Outbound Travel.
They seek good value for price, prefer packaged tours with busy schedule of
sightseeing activities. Heavily reliant on Travel Agent.
4. They want the “must see” sites.
5. ALL OF THIS IS RELATED TO FACE AND WHY PICTURE TAKING AND PRESENT
BUYING IS SO IMPORTANT
EXPERIENCED TRAVELLERS
1. Have done the packed tour and now seek more.
2. More willing to spend more on entertainment and shopping.
3. The more experienced the traveller the less organized activities matter. For this
segment as we move closer to 2020 the relaxation issues will become ever more
important but not just yet.
4. Searching on the Internet for information is ever more important.
90% OF CHINESE TRAVELERS TRAVELING TO EUROPE
SEARCH INFORMATION ON THE WEB:
CAN THEY FIND YOU?
EXPERIENCED SUBSET OF AFFLUENT TOURISTS
1. Special needs of this group-a strong correlation between income and leisure
travel.
2. Those with higher incomes are much more willing to trade up for better meals
and entertainment.
3. Rather than very busy sites they want “memorable experiences” and to feel
“unique”-REMEMBER FACE MATTERS.
4. Also look for sports themed trips, wildlife and anything exotic they cannot get at
home.
SOME GENERAL THINGS TO REMEMBER
1. For the middle class Chinese Traveller it is more about basic services and price
than about “value added” extras. Only slightly less true for the emerging affluent.
Most complaints about hotels in China relate to cleanliness and basic comforts.
2. Concept of paying for premium services is relatively new in China. A hotel for them
is a place to spend the night rather than an experience to be enjoyed for itself.
3. Chinese travellers are willing to trade up when they travel abroad -why?: (1) The
need for service to get over language barriers; (2) To cope with unfamiliar cultures
and (3) They view international travel as a rare treat.
4. The luxury retail market has already begun to invest in serving the “shopping
market” with provision of “Mandarin” speaking guides.
5. We do not see the same level of attention to the affluent in the wider tourism
sector to date-some exceptions of course.
CONTD:
6. Most airlines lack signs in Chinese as do restaurants and hotels and very few
menus in Chinese.
7. The forward looking are providing a Chinese welcome and at least a Chinese
Breakfast.
8. A good deal of travel planning and search is “on line”-who do you ask in a Country
when many have never ventured abroad before?.
9. Remember most Chinese cannot access your website because of the Chinese
Censorship arrangements.
SO WHAT SHOULD YOU BE THINKING ABOUT?
1. Tailored offerings for Specific Segments.
2. Think about a “First Mover Advantage” in a smaller city with less competition.
This will allow you to build your brand.
3. Consider linking with a Chinese Partner.
4. You need to thoroughly research the culture and have patience-it will not happen
quickly. The old Chinese proverb might help-”Dripping water pierces a stone”
5. Deng Xiaoping cautioned the Chinese to “hide your brightness, and bide your
time” for fear of upsetting the Geopolitical order of the World. He cautioned to
“cross the river by feeling the stones”-A very good way to approach your business
dealings in China.
RIORDANS TRAVEL AND CHINA
WWW.RIORDANSTRAVEL.COM
1. Project began three years.
2. Significant desk research and field research in China.
3. Having a well connected Chinese Person has been Key.
4. Focus is only at the very high end-millionaires and golf the key lever.
5. Website is now up and running in China on a Chinese Server and approved by the
Censor.
6. The need for a constant presence in China is paramount-we now have
established a full time presence in Beijing.
7. Business will be low volume and very high value added and would expect major
growth from 2014.