China’s Millennials Offer Huge Opportunities

Young Chinese travelers are spending on experiences instead of material things, which could open new doors for hoteliers.

The numbers can be a bit mind boggling. It’s well known millennials are oriented toward buying experiences versus stuff. But it turns out this attitude isn’t unique to the United States. China’s burgeoning middle class is showing the same sensibility, which presents huge possibilities – and new challenges – for the travel industry.

According to a study by McKinsey & Company, 76 percent of China’s massive population will be considered middle class within five years. That’s roughly 1 billion people. China’s millennial generation alone – those now aged between 19 and 35 – number 400 million. By way of comparison, the baby boom generation in the U.S. is roughly 76.4 million.

Helen Wang, a Silicon Valley entrepreneur and author of The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means for You, said in a recent interview with The Diplomat that this generation “grew up during China’s economic reforms and opening, and benefited significantly from the increasing prosperity.”

“They grew up with the internet and social media,” according to Wang, and “as consumers, they are extremely demanding. They want good products and services, and they want them fast,” she said, adding, “they have gone beyond ostentatious consumption. They are consuming for their own personal enjoyment.”

And Wolfgang Arlt, director of the China Outbound Tourism Research Institute, told China Daily that the “the desire of seasoned Chinese travelers to experience authenticity … is getting bigger.”

A report on Chinese travelers abroad shows that shopping is no longer the main source of spending. Now it’s dining and sightseeing. Experiences, in other words – not things.

So what does this army of sophisticated and demanding travelers mean for the hotel industry?

The most obvious fact is that it presents enormous growth potential. Chinese travelers are expected to take an estimated 700 million trips over the next five years.

And if the opportunity is significant, so are the challenges to capturing this market:

• Customer service before they arrive: Lee McCabe, VP, North America for China-based e-commerce platform Alibaba Group, told Hotel News Now that Chinese consumers are used to a certain level of detail when it comes to customer service. “In the West, about 85 percent of customer service occurs post-transaction,” he said. “In China, it’s pre-transaction, because they have a lot of questions about every product when it comes to commerce and travel.” A strong and widely available loyalty program is one important way to provide that level of pre-transaction customer service.
• Personalized experiences: More sophisticated Chinese travelers are also demanding more personalized experiences. This means finding ways to offer them access to things like private concerts, family-focused experiences, and court-side seats at sporting and other events. It also means having someone available who speaks their language, providing foods that are familiar to them – particularly at breakfast, when travelers tend to seek familiar cuisine.
• Making global travel easy: With tens of millions of trips abroad each year, Chinese travelers will seek out brands they trust wherever their travels take them. That requires having global scale, and integrated functionality to make the entire travel experience truly frictionless – from planning, booking, paying and managing a trip to all of the activities associated once at the destination like shopping, dining and sightseeing.

As Wang notes, the new generation of Chinese middle class travelers has grown up on the web. They’re used to buying and paying for things without ever reaching into a wallet. The ability to use digital payment services like Alipay will be increasingly vital to the travel industry.

In fact, the reason Marriott decided to embark on a joint venture with Alibaba was precisely because it will help both companies better serve this travel market. Alibaba’s size is mind boggling, and Marriott already has a strong presence in China – with almost 600 hotels either open or in the pipeline, including 36 in Shanghai, which will increase to 52 by year’s end – and around the world.

The simple truth is that China’s massive and increasingly sophisticated middle class is going to set travel market trends not just in China, but around the world, for the foreseeable future.

This article originally appeared in Today's Hotelier.