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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

Spending Power of Chinese Tourists

Spending Power of Chinese Tourists

KIM Jin-Hyuk

Jan. 21, 2011

Transcript

Welcome to our video program. I’m Jin-Hyuk Kim from the technology and industry department.

You can see many Chinese tourists taking photos these days around the main gate of Ehwa Women’s University, downtown Seoul. The university has become a tourist hotspot with more than 2,000 Chinese visitors a day.

Why? First of all, the pronunciation of the school’s name ‘Ewha’ sounds similar to the Chinese word ‘利發 (Li-fa),’ which means “making money.” For another, since the university is known as the best women’s university in Korea, a sort of myth has spread among Chinese tourists that taking photos in front of the school’s gate will give them good fortune in getting their daughters married to rich men.

The popularity of the university as a tourist hotspot showcases Korea’s status as a tourist destination. As of 2010, the number of tourists came in slightly below 2 million. As the number grows, there are increasing voices pointing to the need to recognize the power of Chinese tourists.

They cite, for one, the sheer number of tourists. The number of outbound tourists from China amounts to 50 million a year, about the size of Korea’s population. The number stood at around 3 million as recently as 20 years ago, but is skyrocketing at incredible rates. The World Tourism Organization forecast the number of Chinese outbound tourists to exceed 100 million per year by 2020.

Most importantly, Chinese tourists are big spenders. In 2009 alone, Chinese tourists spent about 50 trillion won abroad, and this amounts to the same amount Koreans spent at department stores and big discount stores in all of Korea in a year.

There’s a good example that illustrates Chinese tourists’ love for shopping. A term ‘Beijing Pound” was coined by the British media, after Chinese tourists swept luxury boutiques in Britain during last year’s Christmas season. They account for about one third of the sales of Burberry boutiques in Britain. In fact, the amount Chinese tourists spend on shopping sprees ranks fourth in the world, following Germany, the US and Britain.

To cash in on the massive Chinese tourist population, major economies and companies around the world are exerting an all-out effort to appeal to the generous spenders. Among them, Korea and Japan are at the forefront. The two nations have launched marketing campaigns at the national level, including lenient visa issuance standards. Korea used to issue multiple visas only to important figures of China, but is now issuing them to the middle class people like teachers and graduates of prominent universities.

In Singapore, gambling was strictly forbidden under the leadership of former Prime Minister Lee Kuan Yew. But the island country is now in a competition with Macau to attract more Chinese tourists, opening large upscale casinos like Marina Bay Sands and Resort World Sentosa.

Companies in the service industry in particular are taking swift steps to cater to Chinese customers. BIC Camera, one of Japan’s leading electronics discount retailers, has distributed handbooks for essential Chinese expressions to all employees. It is now mandatory for the staff working at customer contact points to memorize these expressions.

In the cosmetics industry, Shiseido introduced a clever marketing strategy aimed at Chinese customers both in Japan and China. When Chinese tourists buy products in Japan and drop by the Shiseido store back home, they are eligible for a free bag as a gift. This campaign proved extremely popular during the Chinese lunar new year holiday.

A lot is at stake for airlines as well. Air France dispatches Chinese crew to all flights to/from China and provides Chinese food.

For now, however, only 2-3% of Chinese outbound tourists visit Korea. If the number is pushed up to 5%, as many as 5 million will come to Korea and if it is further pulled up to 10%, Korea will have access to 10 million new customers with considerable buying power.

We tend to think of the service industry as a domestic-oriented one, but when factoring in 5 million overseas customers, it is not. That is why we need companies’ marketing and aggressive strategies to lure them.

To change our mindset is the top priority. It cannot be denied that some people in Korean society are still dismissive of Chinese tourists. This should be changed. Korea needs to start viewing Chinese tourists as valued guests.

Next, we need the kind of products that tourists can buy and enjoy only in Korea. Do you know what the most popular Japanese goods are among Chinese tourists to Japan? Nail clippers with magnifiers and ceramic knives, and Burberry blue label, which is sold exclusively in Japan.

Gaining insights from Japan’s case, how about launching package tour products that combine Korean cuisine and shopping? Or how about publicizing the works of Korean artists and commercializing them?

Moreover, Korea boasts many skilled aesthetic surgery clinics, including the world’s best hair transplant surgeons. Medical tour products, which combine medicine and tourism need to be developed.

I started my story with Ewha women’s university. As suggested by the story, another good way of inventing distinct tourism items is to develop tourist spots that offer tourists memorable experiences and a good story.

Souvenir shops in Bali, Indonesia have been transformed over the last few years. Before, their main item was Hindu God sculptures, but they have been replaced with Buddha sculptures. This is what Chinese tourists want. It may sound like an exaggeration, but the shops of Bali have changed the face of God for Chinese tourists. Of course we don’t necessarily need to change the face of God. But I think it is time for us to change our own faces towards Chinese tourists.

Thank you for watching. I’m Jin-Hyuk Kim.

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