Professor Alastair Morrison, Distinguished Professor Emeritus and ITSA President, presents tourism operators 9 excellent reasons to start business in China, 5 challenges to face and 8 reccomandations in order to succeed. #graduationMTM8 www.mtm.iulm.it

1. Why the Chinese market
represents an economic
opportunity for Italian operators
IULM, May 27, 2013

2. Congratulazioni!

3. Presentation Outline
Three parts:
The reasons: Why should Italy give China a high
priority in international tourism marketing?
The challenges: What are some of the major
challenges in targeting and catering to the Chinese
market?
The recommendations: How can Italy and Italian
tourism operators attract a larger share of the
outbound travel market from Mainland China?

4. The Reasons
Why should Italy give China a high priority in
international tourism marketing?

5. Increasing GDP
growth, personal disposable
incomes and urbanization
Major economic and demographic trends:
Rapid growth in GDP.
High rate of urbanization.
Expanding middle class.
Increasing household incomes.
Increasing disposable incomes.
1.35 billion people.
635 million urban population
(47%).
364 million family households.
Middle class 2012 = 230 million
Middle class 2022 = 630 million
1. Reason

6. 10.4
9.3
7.8
1.7 1.7
0.1
4.2
3
0.7
1.8
0.4
-2.3
4.5
-0.8
0.2
1.8
0.8
-0.1
2.4
1.8
2.2
-4
-2
0
2
4
6
8
10
12
2010 2011 2012
China France Germany Italy Japan UK USA
Real GDP Growth Rates: 2006-2011 (%)

7. Higher educational levels and
knowledge/curiosity about the
world outside China
Major education and lifestyle trends:
Enrollment in higher education is expanding very rapidly.
More Chinese students are studying abroad; according to OECD, 18.2% of the
students enrolled in member countries are from China – the largest proportion and
highest absolute number of foreign students.
The lifestyle trend for greater consumption is growing very fast.
Spending on luxury products by the Chinese exceeds all other countries (McKinsey).
34.2 million higher-education
students in 2012 (Ministry of
Education China).
2,358 higher education institutions
in 2012.
$250 billion investment by Chinese
government in higher education.
2. Reason

8. Rapidly expanding use of the
Internet and social media
Major online trends:
Tremendous growth in micro-blogging by Chinese; 309 million microblog users at the
end of 2012, up 19% over 2011.
Mobile phone microblog users exploding, at end of 2012 there were 202 million.
Online shoppers at 242 million, up 42.9% year-on-year.
468 million instant messaging users; 275 million social networking website users.
China is the largest Internet user
market in the world at 564
million at end of 2012.
Also largest number of mobile
Internet users at 420 million.
3. Reason

9. 309 million
microblog
users
564 million
Internet users
in Dec. 2012

10. More purchasing of
international product brands
including luxury goods
Major consumer buying trends:
The Chinese now account for significant proportions of certain luxury brands’
worldwide sales; LV (27%), Gucci (28%), Prada (34%), Burberry (25%), etc.
Buying of luxury products when traveling outside out China is growing in popularity; in
a recent survey, 75% of Chinese reported buying luxury goods while abroad.
“Conspicuous” consumption is very
evident in the expanding middle class
of China and also among the very
wealthy.
Chinese Government taxes on
imported luxury products are very
high.
4. Reason

11. There is huge
worldwide interest
in the purchasing
of luxury products
by the
Chinese, both
when buying in
China and when
traveling abroad.

13. Fast growing volume of
outbound travel from
Mainland China
Major China outbound travel trends:
Rapid growth in outbound travel.
Now there are114 ADS-approved countries.
58.9% of outbound travelers in 2012 were leaving China for the first time, but that
proportion is falling and “repeaters” are growing.
More FIT arrangements is a distinct trend, although Chinese still like group travel.
83 million outbound Chinese
travelers in 2012.
Total expenditures of $102 billion
on international travel in 2012.
5. Reason

14. Major Statistics on Outbound Travel
The China outbound market grew by 167.5% from
2005 to 2012 and has reached approximately 83
million tourists.
However, about two-thirds of all these outbound
tourists just go to Hong Kong and Macau.
It is forecast that there will be at least 155 million
outbound tourists from China by 2020.
Italy attracts a very small proportion of Chinese
outbound tourists (less than 1%), but the volume
is growing.

15. 31.03 34.52
40.95
45.84 47.66
57.39
70.25
83
155
0
20
40
60
80
100
120
140
160
180
2005 2006 2007 2008 2009 2010 2011 2012 2020
Outbound Tourism Market from China (millions)

16. World’s #1 Source Market

17. May be traveling abroad for the first time; so geared up to splurge.
Import taxes on foreign goods in China are very high.
May be buying items for friends and work colleagues (or to resell in China).
Gift-giving has a strong tradition in China.

18. Hong Kong
39%
Macau
28%
Taiwan
3%
Japan
3%
S. Korea
3%
Vietnam
2%
Other
22%
China Outbound Tourism: Market Shares by
Destination (%)
Italy ranks about
19th

19. Outbound incentive
travel trips from China
are also rapidly
growing.
More Chinese
attending conferences
and meetings abroad.
Expansion of study
tours abroad by
companies and
government agencies
as well.

20. Traditional preference for
Europe as a tourism
destination
Major outbound destination trends:
France, Hong Kong, USA, and Italy are the first-choice shopping destinations for
Chinese luxury travelers.
A survey conducted for the U.S. Travel Association indicated that 5% of the Chinese
respondents were likely to visit Italy in the next two years (France was 12% and UK
was 6%).
Recent survey by the
China Tourism Academy
showed that 54% of China
luxury travelers most
desired overseas
destination in the next year
was Europe.
6. Reason

21. Knowledge of the
history, culture, food and wine
of Italy
Major knowledge trends:
The Chinese increasingly are recognizing the rich history and
culture of Italy as represented by destinations such as Venice,
Rome and Florence.
There are also becoming increasingly aware of the Italian
cuisine and wines. Italian food is considered to be very healthy.
Increase in wine consumption and interest in wines of Italy.
Italy is also considered a romantic destination by Chinese.
7. Reason

22. Association of Italy with high
fashion and design
Major image trends in China about Italy:
Italy is strongly associated with high fashion along with
France, USA and UK. Many Italian fashion brands are
already well-known and highly sought after.
Italy rated highest for “famous for Arts” by Chinese in a
KPMG survey. Rated second highest after France for
“famous for luxury design” and “famous for fashion
design” (chart on following slide).
8. Reason

23. KPMG Survey Results
Italy rated highest for “famous for arts” and “romantic.”
Italy rated second highest for “famous for luxury design” and
“famous for fashion design.”

24. Association of Italy with high
fashion and design
8. Reason
The Essence of the
Economic Opportunity!

25. Many overseas Chinese living in
Italy
Major emigration and study abroad trends:
There are over 200,000 Chinese living in Italy.
There are also many Chinese students who are registered at universities and colleges
in Italy. In 2010-2011, there were 5,293 Chinese students in Italian universities.
An estimated 10% of China’s 10 million graduates per year are planning to study
abroad.
9. Reason

26. The Challenges
What are some of the major challenges in targeting
and catering to the Chinese market?

27. Fierce competition from all the world’s
major destinations
1.
Challenge

28. Not a uniform market!
China is a very large country with a huge
and very diverse population.
It cannot be treated as one uniform
market, but has to be segmented into
smaller parts and targeted. This presents a
major challenge for destination marketers.
There are significant differences by regions
(e.g., north vs. middle vs. south vs. west)
and cities; age groupings; foreign travel
experience; tour groups vs. FIT; interests;
household income levels; Internet users vs.
non-users, etc.)
2.
Challenge

29. Differences by regions and cities
2.
Challenge
China has 160
cities with more
than 1 million
people
Three economic
powerhouses –
Bohai; Yangtze;
Pearl

30. The Chinese seniors market – more mobile and
willing to travel for new experiences
Differences by age groupings

31. Young market

32. Differences
by
experiences
Inexperienced
Travelers
Experienced mass
market travelers
Experienced affluent
travelers
Attitudes
and
aspirations
Travel is for
sightseeing – the
more the better.
Travelling around the
world is a lifetime
dream
Travel is to explore
cities outside
nearby regions.
Outbound travel
is an indication of
status and special
occasions.
Travel is good for
relaxation and
stress relief.
Prefer to return to
places that offer
relaxing activities
and a slower pace of life.
Trip
activities
Packed schedules of
must-see sites.
Historical and
museums.
Sightseeing and
relaxing.
Entertainment, shopping,
and luxury accommodations
rather than overscheduled
sightseeing.
Trip
planning
Travel agencies for
packaged tours and
booking assistance.
Word of mouth,
TV, and websites.
Fewer packaged tours
and more independently
planned trips. Online
search and booking.
Websites are the main channel
for travel planning. Premium
theme-based tour packages for
outbound trips.
Share of
Market
Declining Stable Growing
2010 56% 23% 21%
2020 33% 26% 41%

33. Language, cultural and dining/drinking
differences
3.
Challenge
Chinese prefer to speak and read
Mandarin or Cantonese; not many
know English very well and much
fewer have mastered Italian.
Major cultural differences
between China and Italy. Chinese
more of a collectivist culture, so
tend to be more willing to do
things in groups when traveling.
Food is extremely important!
Dining and drinking are major
social activities for the Chinese; a
way of having fun and sometimes
“showing off.” Dining can be very
noisy and animated.

34. Little things count (for Chinese travelers)4.
Challenge
Slippers; toothbrush & toothpaste Electric kettle; tea service
Round dining tables Sockets for Chinese plugs
Playing cards
& Chinese
snacks in
guest rooms

35. Dealing with unusual and “rude”
behavior
5.
Challenge
On September 22, the two
government departments
exposed 10 sorts of bad
behaviors, Southern
Weekend reported on
September 28.
"Littering", "spitting", "snatchi
ng bus seats", "queue-
jumping", "taking off shoes
and socks in
public", "speaking
loudly", "bad temper and
cursing", "smoking in non-
smoking areas" and many
others are listed in "The
Frequent Bad Behaviors of
Chinese Citizens Who Travel
Abroad", enumerating
complaints by netizens.

36. The Recommendations
How can Italy and Italian tourism
operators attract a larger share of the
outbound travel market from Mainland
China?

37. Increased investment in
marketing in Mainland
China
1.
Recommendation
Italy must invest more in marketing its
tourism in Mainland China if it wants to
achieve a larger market share.
Competitive destinations have a greater
presence in China and are spending
significantly more in appealing to Chinese
outbound travelers.
Examples of online and offline promotion to
Chinese market from South Africa and
Malaysia shown on next slide.

38. South Africa Tourism Chinese website and
Sina Weibo page
Tourism
Malaysia
exhibits at
Beijing
shopping
mall

39. Integrated and concerted
promotional campaign
across multiple partners
2.
Recommendation
The present tourism marketing
and promotions from Italy are
fragmented without a concerted
thrust; this is not the most effective
approach to marketing in China.
A partnership approach involving
multiple regions and tourism
companies is highly
recommended.

40. Association with fashion
and automobile brands
needs more attention
3.
Recommendation
Italian fashion and automobiles have high awareness among
Chinese consumers as luxury items.
However all brands and products are being marketed
separately and not in combinations that might be more
attractive to Chinese consumers.
A co-branding approach is recommended, possibly combining
tourism regions and cities with fashion
goods, autos, wine, food products, etc.

41. Popularize Italian wines
and food in China
4.
Recommendation
Italian food is enjoying greater
popularity in China, especially
pasta and pizza.
Italian wines are not particularly
popular now and lag well behind
France and other countries.
Staging Italian wine and food
festivals in the larger cities such
as Shanghai, Beijing, and
Guangzhou will be a great idea.

42. Make visa acquisition
easier for Chinese at
Italian consulates and
embassies
5.
Recommendation
It is difficult and often a frustrating experience for Chinese
citizens to get visas for Italy.
Immediate attention needs to be given to the current system of
screening applicants to speed up visa approval times and to
give Chinese citizens a better impression of Italy and its
willingness to welcome them as tourists.
Given that the Chinese today are notoriously “last-minute”
planners, systems such as Visa on Arrival (VOA) are very
popular (e.g., Thailand, Maldives, Bali, etc.)

43. “Our (Italian) system
continues to look at the
Chinese through an
obsolete lens: seeing
them as potential illegal
immigrants hocking
counterfeit bags and
sweaters on the streets
of Naples, or huddled in
Prato, the textile-
producing town near
Florence that hosts Italy’s
largest Chinese
community.”

44. Consider the VFR
market based on
Chinese living in Italy
6.
Recommendation
Chinese people are very family-
oriented and want to visit their family
and friends living abroad.
A special program should be
considered of working with the
Chinese living in Italy to invite their
family and friends to visit them.
This program could be launched via
the Chinese social media using
micro-blogging and chat websites.

45. What about Marco Polo?
He’s so well known in
China
7.
Recommendation
Marco Polo is a
legendary figure in
Chinese history and his
life in China is especially
celebrated in the Yangtze
River Delta.
Cooperation with cities
such as
Suzhou, Hangzhou and
Yangzhou is a great idea.

46. Back-to-back World
Expos – Surely a great
opportunity?
Recommendation
8.
Surely the holding of the 2010
and 2015 World Expos in
Shanghai and Milan
respectively offers a unique and
huge opportunity for the two
cities to cooperate.
A joint marketing campaign for
2014-2015 is suggested and
also a “sister city” arrangement.

47. Contact information
Alastair M. Morrison, Ph.D.
Distinguished Professor of Hospitality and Tourism Management
President, International Tourism Studies Association (ITSA)
Marriott Hall, Purdue University
West Lafayette, IN 47907-2059, USA
E-mail: alastair@purdue.edu; alastair@belletourism.com
Phone: 1-765-409-0004 (USA)
Tel: 13761855678 (in China)
©2013 Alastair M. Morrison