Chinese traveler spending is up, and millennials in particular are splurging much more aggressively. That’s the conclusion, at first glance, of a Hotels.com annual survey of Chinese tourists—but the travel industry and luxury shops should’t read too much into that. The survey is of “intended,” not actual spending, and is effectively skewed toward the spending patterns of wealthier travelers not the majority, who may actually spend much less.
This year’s Chinese International Travel Monitor (CITM) released in July, seemed to discover some potentially dramatic changes in the outbound Chinese travel market compared to last year. Data from Hotels.com, for example, shows that wealthier Chinese tourists from tier 1 Chinese cities are prioritizing leisure travel more than ever. However, the survey also drove home a recurring issue for travel industry players: inadvertently misleading data. It’s a problem that has limited the ability for both destinations and companies around the world looking to cater to Chinese tourists.
China travelers said they intended to spend $320 a day on holiday, but the data doesn’t tell the whole story
Respondents to the CITM for 2018 reported a 40 percent increase in intended travel spending over last year, with millennials reporting an 80 percent increase in spending. Chinese travelers interviewed by the company plan to spend $320 (RMB 2185) per day while on holiday, and millennials intend to spend $346 (RMB 2362). Chinese millennial travelers intend to spend 36 percent of their income on travel, while the average for all travelers is 28 percent of income.
While the methodology is sound, it’s likely not wholly representative. Fifty-one percent of respondents were from tier 1 Chinese cities, defined as the major, highly-developed metropolises of Beijing, Shanghai, Guangzhou, Tianjin and Shenzhen. Thirty-three percent came from tier 2 cities, like Nanjing, Chengdu and Hangzhou. The remaining 16 percent came from tier 3 cities. This means that the average spending data reported by the CITM is likely much higher than that of the average Chinese tourist.
The latest CITM report does not reveal the criteria used to place cities into tiers or the exact geographic distribution of the report’s 3,047 respondents.
Focusing on the spending of tourists from tier 1 cities can lead to inflated estimates of Chinese tourist spending
This distribution of respondents is important to note as average incomes in major tier 1 cities is higher on average compared to other Chinese cities. Last year, Shanghai and Beijing had the country’s highest rates of disposable income per capita with $9,067 (RMB 58,987) and $8380 (RMB 57,230) respectively. Zhejiang Province, one of China’s richest and home to major second tier cities, had a per capita disposable income of $6156 (RMB 42,045). Overall, the per capita disposable income of China stood at $3803 (RMB 25,974) in 2017, less than half that of either Shanghai or Beijing.
While Chinese tourists from these wealthy tier 1 cities are by far the most valuable and influential group of Chinese residents, they represent 10 percent of China’s population. Considering that just over 51 percent of the respondents to the Hotels.com CITM survey were from tier 1 cities, it’s unsurprising that the respondents’ travel spending is so high. This factor alone should give industry stakeholders pause when making assumptions about the Chinese outbound travel industry.
The digital gap between tier 1 cities and the rest of China is quickly closing; this should make it easier to collect accurate data on Chinese travelers in the future
Of course, this isn’t necessarily the fault of Hotels.com. Bad data about the spending and number of outbound trips made by Chinese tourists is a problem that both governments and international organizations struggle with. Obtaining a good sample size with a representative geographic spread of respondents is still challenging in China, despite the rapid adoption of digital technologies among Chinese consumers. Consumers in Shanghai, Beijing, Shenzhen, etc. are simply more accessible than those living in tier 2 or even tier 3 cities because they are more present online.
Even if the data from the CITM isn’t representative of the Chinese market as a whole, it illustrates that both spending by Chinese tourists and the perceived value of international travel is growing in China among its most influential consumers.