Iulm may 27 2013 morrison ppt

Why the Chinese market represents an

economic opportunity for Italian operators

May 27, 2013

IULM, Milan, Italy

Prof. Alastair M. Morrison 1

Why the Chinese market

represents an economic

opportunity for Italian operators

IULM, May 27, 2013



May 27, 2013

IULM, Milan, Italy


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?



May 27, 2013

IULM, Milan, Italy


The Reasons

Why should Italy give China a high priority in

international tourism marketing?



May 27, 2013

IULM, Milan, Italy


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



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IULM, Milan, Italy


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 (%)



May 27, 2013

IULM, Milan, Italy


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



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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



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IULM, Milan, Italy


309 million

microblog

users

564 million

Internet users

in Dec. 2012



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IULM, Milan, Italy


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



May 27, 2013

IULM, Milan, Italy


There is huge

worldwide interest

in the purchasing

of luxury products

by the Chinese,

both when buying

in China and when

traveling abroad.



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IULM, Milan, Italy




May 27, 2013

IULM, Milan, Italy


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



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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.



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IULM, Milan, Italy


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)



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World’s #1 Source Market



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IULM, Milan, Italy


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.



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IULM, Milan, Italy


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



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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



May 27, 2013

IULM, Milan, Italy


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



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IULM, Milan, Italy


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



May 27, 2013

IULM, Milan, Italy


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.”



May 27, 2013

IULM, Milan, Italy


Association of Italy with high

fashion and design

8. Reason

The Essence of the

Economic Opportunity!



May 27, 2013

IULM, Milan, Italy


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



May 27, 2013

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The Challenges

What are some of the major challenges in targeting

and catering to the Chinese market?



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IULM, Milan, Italy


Fierce competition from all the world’s

major destinations

1. Challenge



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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



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Differences by regions and cities 2. Challenge

China has 160

cities with more

than 1 million

people

Three economic

powerhouses –

Bohai; Yangtze;

Pearl



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The Chinese seniors market – more mobile and

willing to travel for new experiences

Differences by age groupings



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Young market



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IULM, Milan, Italy


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%



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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



May 27, 2013

IULM, Milan, Italy


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",

"snatching 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.



May 27, 2013

IULM, Milan, Italy


The Recommendations

How can Italy and Italian tourism

operators attract a larger share of the

outbound travel market from Mainland

China?



May 27, 2013

IULM, Milan, Italy


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.



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IULM, Milan, Italy


South Africa Tourism Chinese website and

Sina Weibo page

Tourism

Malaysia

exhibits at

Beijing

shopping

mall



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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.)



May 27, 2013

IULM, Milan, Italy


“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.”



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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.



May 27, 2013

IULM, Milan, Italy


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: [email protected]; [email protected]

Phone: 1-765-409-0004 (USA)

Tel: 13761855678 (in China)

©2013 Alastair M. Morrison