The China Outbound Travel Education Series – part 2 (The Industry)
29 June 2009 // Filed under China Outbound Education
The travel industry in China is complex and vague for two main reasons. First, the industry has only recently been confronted with new free market mechanism where consumers are free to choose their travel destinations. Second, despite this, the industry is still largely controlled and directed by the government. So what effect these two seemingly conflicting factors have?
This situation is comparable to other sectors in the Chinese economy which are in a transitionary phase from centrally controlled policies to free market mechanisms. The market mechanism is clear to Western players in travel and tourism: the consumers’ demands must be met by suppliers with a premium on value added. But the overwhelming role of Chinese governmental institutions is often misunderstood by Western businesses.
In the Chinese travel industry, the national, provincial and city governments influence greatly the development of the market. We expect this influence to gradually decrease over the coming years, in light of WTO regulations and increased openness to the west. As it stands, only a limited number of licenses are issued to Chinese travel agents allowed to operate international travel. There is no distinction between retail and wholesale business. Foreign tour operators are not allowed to conduct outbound travel in China in any legal form though there are signs that this situation may change in the future.
The limited number of Chinese travel agents engaged in outbound travel clearly cannot meet the growing demand for travel abroad. This has resulted in an extensive grey network of travel agents operating without a license. The big disadvantage of this grey network is that they are not legally liable, are not allowed to deal with foreign exchange or handle visa applications. But this unofficial sub-sector has been the most active, succeeding in gaining a sizeable market share by focusing on business travel or using ‘franchised’ licenses.
Some key points to consider:
? Only one third of the travel business is actually operated by official travel agencies, the rest passes through other organisations such as government bureaus, trade promotion bodies, consultants, private networks and contacts abroad.
? Gaining access to the Chinese market and developing a successful strategy requires first a good understanding of the complicated situation.
? Freelance agents often ‘rent’ or ‘franchise’ an outbound travel license number from an established agency to sell and operate their own independent groups and individual travel business.
The China Outbound Travel Handbook 2008 in blog post sized chunks for easy reading. The posts are abridged versions of the book to give a general overview of China’s tourism industry, the marketing and sales approaches that work, case studies from different destinations, tips on hospitality and more. At any point you can go to our website to read the full version or join the ChinaContact Tourism Network and download the PDF version for free. A license to print the handbook can be purchased from our website as well.
Next week: part 3 – Approved Destination Status (ADS) policy
2009-06-29 :: Roy Graff