China’s lucrative and growing outbound travel

05 jan 2018

Jane Sun, CEO of the Shanghai-based travel services provider Ctrip, loves this story. In 2017, her company considered offering an 88-day, round-the-world package costing $200,000. One question that loomed large: is there a market for such a service? “How long do you think it took us to sell that?”Sun asked a CNBC host recently? No idea, was the reply. “It took us 17 seconds to sell that. To 22 people.” Ctrip was founded in 1999 and listed on NASDAQ at $18 a share price. Last year it peaked at $60 last July. In 2015, Ctrip's net revenues totaled $1.7 billion and in 2016 reached $2.9 billion. In 2016, China bypassed the United States in the number of billionaires and Ctrip is benefiting from China's burgeoning travel market. “We have two fields that we're working on,” Sun told CNBC. “Outbound, definitely, is very important for us, so we made lots of investment in outbound business.”

Double digit growth

Outbound trips from China see double-digit growth. “China is one of the fastest growing outbound travel markets in the world,” says the World Tourism Organization UNWTO, a UN outfit. The country drives overall Asian outbound travel that surged by 11% in 2016. Hurun Report, which tracks developments in Chinese wealth, puts the number of Chinese billionaires at 568 billionaires, against 535 for the United States. Beijing has overtaken New York as the global billionaire capital. China’s super-rich are already permanent fixtures in high-end European and US resorts. Significantly, the country’s middle class is fast following suit. McKinsey & Co estimates that by 2020 more than three-quarters of China's urban consumers will earn up to $34,495 a year. By then, China’s middle class will total nearly 400 million people.

Growth with consequences

Market research shows the Chinese becoming more quality-aware consumers. The McKinsey survey polled more than 12,000 middle class Chinse aged 20 to 45, 84% of whom said they favor quality over price. More than 70% shop more "rationally", i.e. not blindly opting for big logo items."Gone are the days when people used to define a life of good quality through possession of certain items or conspicuous logos," says Jin Liyin, a marketing professor at Shanghai’s Fudan University. "The new middle class see consumption not as a badge of honor, but as a source of value. You see a shifting definition of success from money, power and social status, to the pursuit of well-being and personal realization. That's what defines the new middle class.” 

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