Chinese tourists have been ditching group tours at a rapid pace, and custom-tour operators are reaping the benefits of this booming tourism industry segment. Now that most of these travelers are seasoned, they’re starting to seek unique experiences, and most of them have the adventurous nature and significant disposable income needed to partake in these high-end tours. But there is one traveler demographic within this industry that is still under-served by China’s booming online travel agencies: high-net-worth individuals.
As Chinese tourists have increased the frequency of their travels abroad, a growing demographic of high-end tourists have taken to joining smaller customized tours hoping to escape the crowds of other Chinese tourists making international trips over the holidays. According to Chinese research company Hurun Report, about 3.9 million families in China have assets worth more than $893,000 (RMB 6 million) and 1.6 million households have more than $1.5 million (RMB 10 million), and many of them are looking to spend their money on experiential travel abroad.
The transaction value of China’s customized travel market totaled $1 billion (RMB 6.8 billion) in 2017, according to a recently published report from Chinese research firm iResearch titled “China Online Customized Tourism Industry Report” (2018年中国在线定制旅游行业研究报告). That research firm expects this industry segment to grow as more travelers become aware of the option. The report notes that the customized travel industry is in the early stages and online sales for such tours remain low, leaving significant room for growth. And while the market segment has been around in China since 2000, only 7.9 percent of customized tour revenue came from online bookings in 2017.
The low online travel agency penetration rate may be due to the age of the average customized-tour traveler. The high-end travel market is powered by tourists between 35 and 50 years old. However, 58 percent of Chinese tourists over the age of 46 are the ones choosing long-distance destinations, according to a 2017 report from high-end travel agency HHTravel. The report notes that younger luxury travelers, most of whom are likely to book independent travel online, take fewer long-haul trips due to limited holidays and paid time off.
China’s largest online travel agency Ctrip.com International noted that its customized travel offerings have seen triple-digit annual growth since they were introduced in 2016. The platform now hosts more than 1,500 suppliers and over 6,000 trip designers. The company recently upgraded its customized travel platform to offer tours geared toward high-end luxury travelers with packages that include small group tours to over 80 countries and regions such as Antarctica (a growing destination of interest for older Chinese travelers). Per capita spending on customized tours reached $3,536 (RMB 23,749) among travelers from the four first-tier cities (Beijing, Shanghai, Guangzhou, Shenzhen), according to data from Ctrip. The company noted that the average custom tour costs over $1,489 (RMB 10,000) for domestic travel, $2,978 (RMB 20,000) for short-haul international, and $4,466 (RMB 30,000) for long-haul destinations.
In an effort to attract more of these high-spending travelers, Ctrip launched a customized tour app in March called Jiugongge (九宫格). The company offers a personal touch to assist high-net-worth individuals with their itineraries — a travel concierge will plan an entire year’s worth of travel, including booking yachts and charter flights as well as tending to overseas medical needs. The personal travel agents may give Ctrip an edge in the market segment, as iResearch notes that there are no certification or training standards for a travel concierge.
While more Chinese tourists, particularly affluent travelers, have shown increasing interest in cultural institutions around the world, few museums and tour companies that specialize in such tours have partnered with booking agencies. This leaves more room for the travel concierge to recommend cultural sites within a personalized itinerary.
Most online platforms catering to luxury Chinese travelers choose to rely on third-party partners to offer high-end travel options, but that is no longer enough to attract this growing demographic. The iResearch report states that high-net-worth travelers judge customized tours based on whether they receive personalized service, and whether the tour suits their travel desires and meets their required standards. Many customers still rely on word-of-mouth marketing to determine whether a travel agency can provide them with the trip they need.
Building a reputation among wealthy Chinese travelers will be a focus for the country’s online travel agencies as they jostle for market share in this growing segment. Companies that offer the highest standards for personalized service will end up atop the industry.