Travellers take the free and easy route
Retired teacher Zhu Yinghua is one of an increasing number of mainland tourists turning to independent tours. The 55-year-old Shenzhen resident has received a United States travel visa and will soon set off for a two-month visit.
It will not be her first trip overseas. In 1999, Ms Zhu went on a group tour to Singapore, Thailand and Malaysia and remembers the tight schedule that pushed travellers to rush through activities, from taking pictures on arrival to sleeping on the bus.
'I want a flexible schedule, so I listened to my daughter's advice about taking an independent trip,' she said. With a 40,000-50,000 yuan budget, Ms Zhu, who does not speak English, said she would find a hotel after she arrived and probably join a local tour group for sightseeing.
With increasing affluence among urban mainlanders, more and more people like Ms Zhu are choosing independent travel over the hectic agony of travelling in tightly scheduled tour groups.
The shift in consumer demand does not bode well for the thousands of traditional travel agents accustomed to offering group packages. To survive fierce industry competition, they have already resorted to price wars, quoting so low that they cannot even cover their costs to satisfy customers who want to visit as many destinations as possible at the cheapest price. As a result, guides and local partners of the travel agents have to rely heavily on merchant kickbacks on tourist purchases.
The red-hot mainland economy is expected to record its fifth year of double-digit growth in gross domestic product this year. Amid the accumulation of wealth, mainland citizens spent more than US$16 billion on more than 30 million outbound trips last year. The China National Tourism Administration has forecast that spending will reach US$100 billion in 2015, while the World Tourism Organisation expects the number of outbound trips to increase by an annual 10 per cent to 50 million in 2010.
Most outbound travellers are middle class with a university education, and are proficient in using the internet, according to Grace Pan Wen, a senior manager with ACNielsen's tourism and leisure research team. The team has just completed a survey with the Pacific Asia Travel Association on the outbound travel behaviour of mainlanders, particularly the middle class with monthly household incomes of more than 4,000 yuan.
'For the middle class, outbound travel is no longer a luxury, but an ordinary consumer purchase. They do not like visiting places in a rush, let alone being forced to shop. Many enjoy searching the internet for destination information and creating their own itineraries allowing greater leisure and freedom,' Ms Pan said.
In interviews in Beijing, Shanghai and Guangzhou with people who travelled overseas between September last year and August this year, researchers found that 70 per cent of more than 2,000 respondents used the internet to acquire information about transport, accommodation, food and other aspects of their trips.
The change in consumer behaviour has produced opportunities for online businesses offering hotel bookings and air tickets. Online booking services generated 607 million yuan in revenue in the third quarter of this year, up 47 per cent year on year, according to Shanghai-based consultancy iResearch.
The growth has encouraged the establishment of various online service providers and a shift in business focus by traditional travel agents in recent years.
'Independent travel will definitely become mainstream,' Ctrip.com holiday department director Tang Yibo said. The Nasdaq-listed company had a 57 per cent market share for mainland online travel services as of the end of September, according to iResearch.
Mr Tang said the wide choice independent travel provides can satisfy consumers who want an experience, as opposed to the decades-old group tour model designed for people keen to display their wealth or show-off by listing the number of countries they have visited.
'In the era of the internet, service providers and customers have equal opportunities to acquire information. Any company that ignores customer demands will be washed up in five to 10 years. The mainland has a big market and every year there are new travellers, but companies that disrespect customers will fail,' he said.
Ctrip has been targeting high and middle-income end users since it was set up in 1999, because these consumers are seen as habitual internet users. The most favoured destinations are Hong Kong and Macau, and Southeast Asia because travellers face fewer language barriers and visas are easy to obtain.
In contrast, few people travel independently to Europe, Australia or New Zealand as it is more difficult to get the necessary approval. Many mainlanders feel unsafe in Africa, so independent travel to the continent is relatively uncommon, Mr Tang said.
'There are two external factors influencing independent travel: the visa policies of destination countries and their language services for tourists. Internally, there are no obstacles. Online payment used to be a problem, but with the wider popularity of credit cards has made payment less of a problem,' he said.
'Independent travel will be the dominant choice in the next 10 years if visa policies are loosened,' he added.
In addition to market leader Ctrip, other online travel agents include eLong, which has partnered US-based Expedia, and had a 13.8 per cent share of the online travel booking market as of end-September. Mangocity.com, a brand under Hong Kong-based China Travel Online, has a 5.8 per cent market share, according to iResearch. The remainder was held by smaller companies.
In 2003, the Tongcheng website 17u.com was established to provide business-to-business services for travel industry insiders wanting to better organise their resources. Then there is travel information search engine Qunar, established in 2005 with venture capital investment, which aims to become the 'Google' of the tourism sector.
The emergence of online companies has forced traditional travel agents to play catch up and offer independent travel services. While the mainland has more than 17,000 travel agents, only about 10 per cent or 1,700 travel agents have outbound travel business licences.
China CYTS Outbound Travel Service executive general manager Sun Changwei said the company's revenue from independent travel increased from zero to 5 per cent. He hopes to see an increase to 30 per cent in next five to 10 years.
CYTS targets people in the 30 years to 40-plus age group who are often among the mainland's well-educated and wealthy, but not necessarily experienced in outbound travel. 'Many feel uncomfortable in foreign airports, trains or restaurants because service standards are different from those on the mainland. This can be resolved when they gain more travel experience or when the mainland adopts international standards. Both take time.'
The company, the market leader in outbound travel services among traditional agents, takes 60-70 per cent of its bookings online and the remainder through its 100 plus outlets across the nation. It is hoping to avoid losing out on online customers by seeking agreements with banks for online payments. At present, people who make online bookings have to go to a CYTS travel agency to pay for their trips.
'The travel agencies are one of our advantages. People can get more information from face-to-face contact with our staff. Also, as we have developed reliable suppliers overseas for our group tour business, our customers can get preferential pricing and backup support at overseas destinations,' Mr Sun said.
Ms Pan said traditional agents could survive if they improve service quality. Online service providers are attracting international venture capital, but the business has its risks too. Many websites have opened in order to cash-in on opportunities but poor management has forced them to shut swiftly.