SOURCE: The Boston Consulting Group

The Boston Consulting Group

March 30, 2011 00:01 ET

China's Emerging Travel Sector Is Rocketing, but a New BCG Study Finds Dissatisfied Travelers at Home and Abroad

Many Companies Compete on Price, but Few Focus on Innovation or Differentiation to Satisfy Unmet Traveler Needs

BOSTON, MA--(Marketwire - March 30, 2011) -  It's "all aboard" for travel companies seeking growth at a time when most mature markets remain sluggish. By 2020, the volume of China's outbound trips will approach that of the U.S., and its domestic market will be worth RMB 3.9 trillion (approximately $590 billion). China's rapidly growing demand for travel, together with the lack of suitable offerings in a fragmented market, presents a rare opportunity for innovative early movers. Both affluent travelers and the emerging segment of middle-class tourists in large and small cities are desperately seeking brands and services they can trust. 

BCG's latest report on China, Taking Off: Travel and Tourism in China and Beyond, documents the growth of China's travel market and its unique characteristics. By 2020, for example, a quarter of all international travelers arriving in Japan and South Korea will come from China, while arrivals from China in Europe will quadruple. In North America, Chinese travelers will rank third among international arrivals. On average, there will be 25 million first-time Chinese travelers every year (or 70,000 every day) for the next ten years.

Yet only a handful of companies understand or are responding to the specific needs of these travelers, who tend to be younger than travelers in the West, less experienced, and more likely to take longer trips with large groups of friends, explains Hong-Kong based BCG partner Vincent Lui, a coauthor of the report. 

Survey respondents reported dissatisfaction on both the domestic and international fronts. When asked to rate the hotel they stayed at on their last domestic vacation, for example, they found basic accommodations lacking, with multinational-brand premium hotels scoring lowest. Affluent travelers abroad find that few hotels offer special services for Chinese, and premium-priced travel packages lack differentiation and interest. Online travel planning, although growing in popularity, is found to be unnecessarily complex. 

However, a few exceptional companies are responding to some of these needs, and they are winning share, notes BCG senior partner Hubert Hsu, another coauthor of the report. Caissa, a Beijing-based travel agency, and Costa Cruises, an international cruise company, have successfully tailored their offerings to specific income segments; Club Med is gaining brand loyalty in China by nurturing customer relationships; Ctrip, a leading travel website, is offering sorely needed hassle-free travel planning; and Shanghai Spring Tour is targeting travelers from smaller cities.

China's speedy ascension in the world's travel and tourism sector, from sixth place in 2008 to second place in 2020, shouldn't be ignored. Because the travel and tourism market in China is still in a relatively early stage of development, it offers some of the best opportunities among all Chinese consumer sectors.

The research for this report was led by The Boston Consulting Group's China Center for Consumer Insight. Surveys were conducted with 4,250 Chinese travelers -- domestic and outbound, business and leisure -- in 15 cities. The topics included attitudes toward travel, travel frequency and patterns, travel expenditures, travel planning, and decision criteria, as well as dissatisfactions with travel service providers.

To receive a copy of the report or arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

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