Recently we looked at how the European tourism industry might think of approaching the coming tourist season in light of the evolving COVID-19 (Coronavirus) situation, noting that although the situation is grim and prone to evolve quickly, eventually, a recovery will happen.
However, we believe that different market segments - specifically the Group Travel and the Free Independent Travel (FIT) segments will pick up at different speeds. We predict that the FIT segment will recover faster and possibly accelerate the trend towards this style of travel as the Chinese market as a whole becomes more tilted to younger, digitally-savvy, and internationally aware tourists.
In this article, we will explore the differences between group travel and FIT, what will accelerate the trend towards FIT as the recovery approaches, and how European businesses might think about nurturing this shift to attract a new generation of Chinese tourists.
Group Travel segment demographics and drivers
The meteoric growth of Chinese group tourism was driven by an expanding economy, a huge number of newly-wealthy citizens who mostly did not speak other languages, and a lack of knowledge about travel in other countries. This segment has seen enormous growth over the past two decades. However the growth in this segment is slowing due to two things: the demographic driving it is aging and evolving. As people become more aware of international travel, the well-known tourist tracks are becoming a little passé. Getting off the beaten track to search out unusual or unique experiences is becoming more popular. An interesting trend in group travel to Europe is also towards smaller, more customized tourism.
FIT segment demographics and drivers
FIT travel is being driven by people born after 1978/79, the opening up of the economy and implementation of the one-child policy. These younger generations had the entire family’s resources dedicated to their education and have grown up with economic and social opportunities their parents would never have imagined. This group has significant disposable income, and is much better equipped to be self-sufficient and seek out their own experiences on the road, with the help of their language skills and smartphone.
Why FIT is likely to recover faster than group travel
There are a number of reasons why we believe FIT is poised to rebound faster than group travel, and potentially accelerate the trend towards this style of tourism.
Reason 1: Ban on group travel but not independent travel
In late January, the Chinese government put a ban on outbound group travel, which back then did not apply to independent travel. While independent travel is certainly slowed significantly as a result of this message and other measures such as many countries closing their borders and banning flights, the fact that it isn’t formally stopped means it will likely start to recover organically as the situation looks better, rather than necessarily wait for official approval.
Reason 2: It’s much easier to book individual tickets than organise a group
Related to the first reason, even when the travel ban is lifted, it takes much more work for tour organisers to arrange travel for a whole group than it does for individuals to book a flight and a hotel. In fact, according to CTA (Chinese Tourism Academy), 43% of Chinese FITs book their trip with two weeks of planning. Furthermore, older generations who make up the majority of group travel segment may be more cautious to consider travel as soon as the situation improves, putting a further dampener on a return to business as usual.
Reason 3: The global tourism industry is nurturing the trend
There are a number of reasons why the tourism industry prefers FIT to group travel. Independent travellers tend to stay longer and visit and spend their money at a wider array of locations, therefore spreading the benefits more widely through the economy. On the flipside, groups tend to spend only at certain predefined locations, and their appearance and (sudden) disappearance can put a lot of pressure on certain businesses, services and infrastructure. The COVID-19 crisis may force the global tourism industry to put more marketing, support, and resources into the FIT segment, thereby accelerating its rise.
Independent travel is an unstoppable force
In Australia, FIT grew its market share in terms of Chinese tourists from 44% in 2012 to 61% by 2017. While in H1 2019 70% of Ctrip bookings to Europe are still for group tours, the COVID-19 crisis is a catalyst for further growth in the FIT segment. Being proactive in nurturing this valuable target will be crucial for the European tourist business in the years to come, particularly for a) businesses that are seeing a decrease in group travel and b) businesses who want to attract more Chinese guests as the recovery shapes up.
One key way to focus on FIT
As the vast majority of Chinese people do not have social media accounts on Instagram or Facebook, use Google to search, or WhatsApp to chat, it’s imperative to have a presence on WeChat. With 1.1 billion monthly users in Q2 2019, WeChat is a true super app that provides the ability to do everything from ordering food and checking into the metro system to making payments and sending invoices.
Businesses can set up shop on WeChat in two key ways; with an official account, or with a mini-program. The official account requires a hands on approach suitable for larger businesses or those truly focused on the market. Mini-programs are oriented to products and services, and enable your business to leverage features including ecommerce, task management, coupons, and so on. Both methods are ways to share information, tell stories related to your destination and offering, and promote products.
To find out more about how a WeChat mini-program can help your business, get in touch!