Independent travel in China is growing exponentially, as a growing number of travelers opt to book their travels independently of traditional tour groups. So with the choice of accommodation left entirely to the travelers and their whim, hotels now have an opportunity like never before to cash in on the
Chinese tourism boom.
Tourists want more than just a bed and a warm shower
For a long time, China’s tourism industry (tour operators) has benefited from working together alongside larger multinational hotel chains that can offer a consistent experience for their customers that is both affordable and straightforward.
- For them, scale is important, both in terms of the number of rooms as well as for driving costs down.
- As such, booking guests at numerous smaller hotels prove a logistic challenge in working with tight travel itineraries and makes it impossible to provide an equally satisfying experience for all their customers.
The result is that most Chinese tourist groups end up staying at nondescript hotels that, while good enough for a night’s sleep, offer little other than a comfortable enough bed and a warm shower.
Change in accommodation
Capitalizing on the growth of such travel has been far out of reach for both independent hoteliers, luxury hotels, as well more exciting chain hotel properties. For tour operators—who look for low costs, scale, long-term contracts, and reliable quality—hotels competing with something that is more than cheap no-frills experiences, fall on deaf ears.
- Therefore, it should come as no surprise that the growth of Chinese independent travel brings a lot of opportunity for hotel’s that offer something beyond the basics—or even something less than the basics.
- After all, Chinese independent travelers are not unlike other independent travelers: some look for the cheapest accommodation available—even if it’s a dormitory bed in the hostel—while others look for a luxurious escape or perhaps an ecotourism retreat.
- With the middleman—the Chinese tour operator—out of the picture, all the factors that tourists’ usually take into account when picking accommodation come into play again.
What will this mean for the future?
Although that’s great news for hotels that cater to niche types of tourists, as well as accommodation providers on both ends of the pricing spectrum, what does it mean for the hotels that have been serving a great number of Chinese tour groups?
- While 50 beds regularly filled by Chinese tour group travelers serves a reliable revenue stream for no-frills hotels, it comes at a cost. Chinese tour operators aren’t shy to take advantage of the scale that they offer, and the negotiated rates are always far below the listed price for the rooms they occupy. Even though it makes little difference in times of excess capacity, at other times, it leaves rooms occupied for a price far below the going rate in the market.
- As one would expect, a common complaint among hoteliers that serve Chinese tour groups is that tour operators are extremely price sensitive, but that there’s little that can be done about it in a buyer’s market. In places where accommodation is scarce, such as Japan, tour groups often opt to put their customers in cheap hotels outside the cities—or between stops on the itinerary—instead of paying a premium for better location. Another common complaint is that Chinese tourists on group tours cause a nuisance to other guests, in part because the number of people who arrive at once, as well as since they often arrive in their buses late at night when other guests are sleeping.
- For hotels serving Chinese tour groups, the allure of replacing their extremely cost conscious group tourists with Chinese independent travelers is strong. With the small margins they operate under with group travelers, it would take far fewer than 50 independent travelers paying market price to replace the revenue stream that 50 group travelers bring—making independent travelers a highly attractive prospect even for hotels that already serve a substantial number of Chinese tourists.
What will this mean for other businesses in the industry?
The same also rings true for other tourism businesses: sights, museums, restaurants, and stores beyond the mainstream all stand to gain from the growth of Chinese independent travel.
- For businesses that already serve a large number of Chinese tour groups, avoiding tour operator commissions and below market price rates for a larger share of their Chinese customers is a welcome change of pace as well.
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