By: Edwin Fuller
Founder and President of Laguna Strategic Advisors

Anyone who thinks the wave of Chinese tourism now inundating the world will slow down any time soon needs to think again. I recently participated in a two-week sales mission to China on behalf of Visit California and the Orange County Visitors Association, and have come away more bullish than ever about China’s long-term tourism potential for California, the US and the world.

Already the #1 source of global tourism, the size of China’s travel market is mind-boggling and virtually untapped. At 1.4 billion people, China is the world’s most populous country, yet only about 5% of its population today holds a passport. Those who do hold passports represent a middle class that is almost as large as the entire population of the US, and a middle class that is expected to double in size to over 600 million people in the next four years. Even at today’s level, 10% of all international travelers today come from China, according to the World Travel & Tourism Council. By 2020, this market is expected to grow by 14%, adding roughly 250 million people.

Among the most promising aspects of China’s middle class is its phenomenal growth. The World Bank reports that China has lifted more than 600 million people out of poverty and into its middle class over the past three decades. The more affluent members of this group are expected to exceed 200 million households by 2020.

These more affluent folks spend about 19% of their annual salaries on overseas travel, putting them among the world’s top spenders both in terms of per trip and number of nights. Oxford Economics and InterContinental Hotels Group recently predicted that as Chinese households move into the upper middle and upper classes (each with $24,000 in disposable income), their demand for long-haul leisure trips and more luxurious accommodations and shopping will escalate. As a point of reference, consider this – last year alone, Chinese visitors to California spent $2.5 billion, or about $7,500 per person, while traveling here; the highest of any overseas visitor group to the state.

As for those who have qualms about the strength and staying power of the Chinese economy and assume future Chinese travelers might feel the need to trim their wings and stay home, they, too, need to think again. Over the past six years, China has ranked as the world’s second largest economy, behind the US. In terms of purchasing power, China already ranks #1. Even at today’s 6.5% economic growth rate, China generates an incremental annual economy equal to Germany’s, the world’s 4th largest economy.

So, who are these travelers?

For one thing, 87% are under the age of 40, younger than one might expect. This group will drive a 55% expansion in China’s consumption spending over the next five years and will account for 53% of all of China’s consumption spending, outspending their parents and grandparents by as much as 40% in many product categories.

They are also highly educated; more than 2/3 have a Bachelor’s degree, another 13% hold a Master’s degree, and an impressive 41% get all their information about the destination they plan to visit from a mobile phone versus 29% who did so two years ago.

For this group, being able to travel abroad is a huge motivator because it’s a sure vehicle for gaining prestige, or “face”, among their peers. Plus, being able to say you’ve visited the US brings with it a certain social status – so much so that 27% of future outbound Chinese travelers recently indicated they are very likely to visit the US in the next six months, with 85% of those who do visit the US likely to choose one of our major cities as their destination of choice.

Should you care? Absolutely! Tourism remains our nation’s #1 services export and is vitally important to the nation’s economy and to American workers. The nearly $1.6 trillion of economic output represented by annual tourism in the US supports nearly 8.1 million US jobs.

As Published