Executive Summary
2004 was a year of recovery for China’s travel and tourism
industry, with total tourism expenditure jumping by 8%, thereby more than making
up for the losses suffered in 2003 due to SARS. Incoming tourism receipts, which
saw the biggest decline in 2003 climbed by 23% in current value terms, while
domestic tourist expenditure rose by more than 4%. In terms of the number of
arrivals, the recovery in 2004 was only partial, as the increase of just over 5%
fell short of bringing the total number of visitors back to the level seen
before SARS.
Outbound tourism booms with increased incomes and
confidence
2004 saw strong growth in outbound tourism with a rise of 17%
in departures and a jump of 215 in outgoing tourism expenditure. Rapidly rising
disposable incomes and easing concerns about safety supported the increasing
demand among Chinese for international travel in general and long distance
travel in particular.
Accommodation volumes up but price competition held value
growth back
Travel accommodation more than fully recovered in 2004 in terms
of volume, with growth of more than 7%, reaching 1.2 billion bed nights.
However, in terms of value, money spent on accommodation fell just short of
reaching the level seen in 2002. The weaker growth in value sales was mainly a
result of fierce price competition, not least with the rapid development of the
budget segment and the growing presence of online agencies, a fact that was only
intensified in 2003 due to SARS and then continued in 2004.
With comfortable, clean accommodation and convenient service at
an inexpensive price, budget accommodation is becoming increasingly popular in
China. During the May Day holiday and October Day Holiday, most budget hotels in
major tourist cities were fully booked in advance, while many four- and
five-star hotels had to offer discounts to lure customers. This popularity comes
despite the fact that budget hotels were unheard of in China until recently. In
2004, there were two major budget hotel chains - Jinjiang Star and HomeInns.
Hostels also emerged during the review period and saw strong growth.
Buses/coaches aid strong growth for transportation
Transportation experienced strong growth in 2004, with value
sales growth accelerating again to reach 7%. Buses/coaches were the largest
contributor to this growth, followed by air transport. Buses/coaches benefited
from continued expansion and improvement of the country’s road networks, and
overtook rail in 2004 as the biggest earner of all forms of transport. Air sales
growth was largely driven by increasing levels of disposable income and
continuous price promotions for airfares.
Car rental saw double-digit volume and value growth every year
of the review period, expanding by a total of more than 220% in current value
terms between 1999 and 2004. Business rentals saw the fastest growth, and
accounted for 82% of total value in 2004, partly due to the fact that business
rentals were on average far longer in duration. There has been strong growth in
the number of small and medium sized businesses who opt for rental cars as a
means of reducing their operating costs.
Travel retail benefits from consumers’ increased
purchasing power
Travel retail sales stood at nearly RMB78,300 million in 2004,
representing growth of 142% since 1999 and an increase of 21% from 2003 in
current value terms. Travel retail has benefited from increasing leave
entitlements, growing emphasis on quality leisure time as well as consumers’
appetite for travel experiences, coupled with sharply increasing purchasing
power.
National parks catching up with amusement parks
With the exception of 2003, which was marred by the SARS
outbreak, tourist attractions saw strong and stable growth throughout the
1999-2004 review period, with value expanding slightly faster than volume at a
total of 29%. Theme/amusement parks was the biggest earner, but national
parks/areas of natural beauty were catching up as a result of growing interest
and appreciation for the natural environment coupled with the rapidly growing
number of relatively affluent urban people.
Fierce competition following China’s WTO entry in 2001
Competition in the travel industry has been getting fierier
between domestic and foreign players. Due to the commitment for China’s WTO
entry, China’s government is gradually opening its tourism industry to foreign
players. Before that, foreign companies did not have the license for setting-up
their own travel agents, or providing tourist services for domestic trips on the
Chinese mainland.
Big international travel retailers such as Flight Centre
Limited from Australia have begun to open joint ventures in China. TUI UK, the
UK’s largest holiday company, and other world tourism giants such as American
Express, Japan Travel Bureau Group, and the UK-registered Business Travel
International have also found, or are looking for, co-operation with Chinese
travel companies. The entry of foreign travel agencies will influence the
restructuring and consolidation of the highly fragmented Chinese tourism
industry.