With more Chinese tourists moving beyond group packages and developing their own itineraries, self-driving trips have become one of the hottest areas of growth. Among younger travelers and middle-class families in particular, renting cars to explore overseas locales at their own pace is fueling an increase in Chinese arrivals from LA to New York — and everywhere in between. This trend has been accelerated by recent developments such as easier and longer-term US visas, more self-driving offers by online tourism agencies in China, and the simple fact that more middle-class Chinese have their own cars back home and find it easy to hit the road in the US or Europe.

According to a recent survey by Mafengwo and the Chinese online car rental site zuzuche.com, the US is by far the most popular destination for self-driving trips among Chinese outbound tourists. More than 46 percent of respondents said they prefer the US for road trips, beating Germany (7.9 percent), Australia (7.6 percent), France (6 percent), and Thailand (5 percent).

The survey found that the majority of self-driving tourists are 25 to 44 years old, with more than 60 percent hailing from first-tier cities (Beijing, Shanghai, Guangzhou, Shenzhen). However, the report noted rapid growth among travelers from Zhejiang, Jiangsu, and Sichuan provinces. By China standards, these tourists are a relatively affluent bunch, with around 30 percent reporting annual incomes of 260,000-500,000 yuan ($41,550-79,970).

So what does this mean for the US? For one thing, it indicates an area of great opportunity for tour destinations, hotels, and resorts “off the beaten path” to reach out to these self-driving independent tourists. This outreach can be via online travel-booking sites, Chinese social media platforms and influencers, or US-based international Chinese students (who, as CLA has previously noted, often make extra cash by “chauffeuring” wealthy Chinese tourists around the country).

This trend also heralds new opportunities for RV brands, retailers, and rental companies to court the Chinese consumer. While the “RV lifestyle” remains highly niche within China, interest is growing, and many Chinese middle-class families are becoming interested in opting for a “hotel on wheels” where they can control the dining options and experience the US on their own terms. Ski resorts and hot springs also have an opportunity to increase outreach to self-driving tourists and encourage them to stop by on their cross-country adventures.

In recent years, many luxury brands, retailers, malls and department stores have seen a wave of Chinese tourist-shoppers unlike any before. Motivated by easier and longer visas, lower prices, the prestige of shopping abroad, and better service and selection, Chinese tourists have become a regular sight from Ginza to Beverly Hills, Bond Street to Madison Avenue.

But alongside the clear opportunity (and rising sales), many, if not most, brands have had to face a new challenge: the unique behavior and demands of these tourist-shoppers.

Having only joined the global travel club in a meaningful way over the past decade, mainland Chinese tourists range from seasoned, independent pros to newcomers on budget-priced group packages, straddling a wide educational and cultural spectrum. Now more than ever, it is critical for brands to be prepared, as Chinese tourism is here to stay. By 2020, the number of mainland Chinese traveling abroad each year will nearly double to 200 million.

Regardless of the inevitable headaches, the upshot for retailers is clear – Chinese tourists currently allocate around one-third of their total travel budget to shopping (triple that of the French). In 2014, Chinese outbound travelers spent an estimated $155 billion abroad, much of it on luxury goods, health and beauty products, and consumer electronics.

Being prepared to receive and serve Chinese tourist-shoppers doesn’t have to be a big production, and — despite the tone of some media coverage — Chinese tourists are far from a monolithic group. Each Chinese traveler is different, and serving them requires the same nuanced approach any luxury brand should be taking to every customer anyway.

One requirement that does apply to every Chinese tourist is patience. Sales staff should be prepared to explain aspects of the brand story and history to shoppers — in Mandarin when possible — and guide the shopper down the path to purchase without condescending. For brands lacking Mandarin speakers, it’s always helpful to create Chinese-language pamphlets or brochures and keep them on hand at all times.

Patience is also a virtue when dealing with more challenging Chinese tourists or tour guides, who may demand discounts or other perks. Calmly and patiently explaining your policies, and perhaps offering an alternative brand-appropriate incentive, is an effective way to defuse awkward situations and ensure a face-saving outcome.

Despite nightmare articles suggesting otherwise, Chinese tourists are gradually getting over their “growing pains” and becoming global travelers in much the same way as the Japanese, Korean, and even American tourists who preceded them. By remaining patient and understanding, brands can avoid tough situations and make a customer for life, whether that customer is a travel newcomer or sophisticate.

With Chinese New Year just around the corner, luxury brands have started rolling out limited-edition collections celebrating the Year of the Sheep. Aimed at Chinese shoppers worldwide, commemorative Chinese New Year collections (and store decorations) have become increasingly common in recent years, ranging from overt (the infamous Gold-and-Red Ferrari 458 in 2012) to subtle (Dunhill’s snake cufflinks in 2013).

This year, a wide range of brands, from Louis Vuitton, MCM, Piaget, and Estée Lauder to Chow Tai Fook, Swarovski, Vacheron Constantin, and Panerai have gotten in on the Sheep-themed action. Retailers, too, are joining in, with Year of the Sheep displays appearing from Fifth Avenue to Knightsbridge.

For brands looking to attract Chinese New Year tourist-shoppers, one of the most tried-and-true strategies is the customized Red Envelope (hongbao). Traditionally stuffed with cash and distributed among friends and family around the holiday, Red Envelopes have been used by brands, tourist destinations, and retailers to publicize gifts with purchase or “Spend X Get Y” promotions and engage outbound Chinese shoppers around the world.

Best practices for Red Envelopes include offering something with inherent value and appropriate flattery; making them bilingual; including promotion codes for customers to present at stores, to track spending; adding QR codes for WeChat accounts (when applicable); offering additional discount/promotion for those who bring friends and family; and using color schemes that include red and gold (auspicious colors in Chinese culture).

Although many brands and retailers hand out Red Envelopes to Chinese shoppers in-store, China Luxury Advisors recommends a more proactive approach, targeting Chinese tourist-shoppers through tour operators or guides, as well as US-based demographics such as international students.

To discuss Red Envelope opportunities for the Year of the Sheep 2015, contact Renee Hartmann at renee [at] chinaluxuryadvisors [dot] com.

2014 was an eventful one for watchers of the Chinese tourism industry. Despite the damper that the continued crackdown on corruption from the Chinese government placed on government travel and spending, growth in Chinese tourism remained stronger than ever. Chinese travelers took an estimated 115 million outbound trips in 2014, a more than 18 percent increase over 2013, when around 97 million trips were taken.

Last year also marked the much-anticipated Alibaba IPO, making China’s e-commerce powerhouse a household name in the US. The digital juggernaut also rolled out a suite of new products in the US market in 2014, among them the online storefront 11Main, and the cross-border payment and logistics solution Alipay ePass. With these developments, Alibaba has made progress in helping brands sell to Chinese consumers – whether they’re in China or the US – who are seeking authentic American products.

However, arguably the most significant event related to Chinese tourism in 2014 was a surprise announcement by President Obama during his November visit to the APEC Summit in Beijing. The new reciprocal visa agreement reached by the US and China extended business and tourist visas from one to 10 years, and student visas from one to five years. Data from the Chinese online travel site Ctrip.com indicated that applications for US visas shot up 50 percent shortly after the announcement.

The agreement was welcome news for the hospitality and retail industries in the US, both of which expect a continued influx of Chinese guests. According to a statement released this fall by the White House, “as a result of this arrangement, the United States hopes to welcome a growing share of eligible Chinese travelers, inject billions in the US economy and create enough demand to support hundreds of thousands of additional U.S. jobs.”

As 2015 kicks off, China Luxury Advisors predicts the following five Chinese tourism trends to gain pace in the United States:

5.) Chinese Tourism to the US Will Outpace Europe and Other Destinations.

Heartened by easier (and longer) visas, more Chinese outbound tourists will opt for trips to the US over popular destinations such as Paris or London. Already seen as an aspirational locale for shopping, education, and real estate, the US will be a major beneficiary as Chinese travelers take more than 200 million outbound voyages by 2020. By 2021, the US expects the number of Chinese tourist arrivals to more than triple to 7 million, contributing more than $85 billion per year to the economy.

4.) Chinese Investment in the United States Will Gain Pace.

Expect Chinese companies to buy at least one major Hollywood studio in 2015, and continue to make large-scale investments in other US companies and industries. Some of China’s wealthiest and most powerful businessmen – among them Alibaba’s Jack Ma and Dalian Wanda’s Wang Jianlin – have made clear their intentions to acquire US businesses, particularly in the cinema industry (with Wang of Dalian Wanda purchasing the AMC movie chain in 2012). As Ma put it, “In ten years, I want five of the top ten global movies to be made by Alibaba.”

Look for Chinese companies to also intensify their focus on acquiring high-profile hotels or hotel chains in 2015, coming off of the heels of this fall’s purchase of the iconic Waldorf-Astoria hotel by China’s Angbang Insurance Group for $2 billion.

3.) 2015 Will Be the Year of Mobile Innovation for Chinese Tourism.

By 2015, the number of smartphone users will exceed PC users in China. Younger Chinese consumers in particular have established themselves as highly mobile-savvy, in many cases preferring mobile commerce (m-commerce) to traditional e-commerce, and spending an increasing amount of time using mobile apps such as WeChat to communicate with peers, shop, and interact with brands.

This growing reliance on mobile devices has also extended to the tourism industry. Currently, 40 percent of bookings on the Chinese online tourism-booking site Qunar are made on mobile, and the company’s mobile revenue skyrocketed 400 percent in 2014. This year, look for Chinese travel sites to invest heavily in innovation as a means to remain relevant and compete in a cutthroat market.

2.) WeChat Will Extend its Reach Outside of China, In Line With Chinese Tourism Destinations and Trends.

Already the most relevant platform to reach and influence Chinese users, Tencent’s mobile messaging app WeChat is here to stay. Currently with more than 400 million users, WeChat has steadily increased its global footprint, and now boasts some 40 million users outside of China. For many Chinese tourists, WeChat has become an indispensable resource for pre-travel research, and via innovative new features has become a way to interact with travel destinations – and even book trips. For brands, WeChat is arguably the easiest way to interact with Chinese fans worldwide, to provide tools such as global store locators and live-chat customer service to globetrotting shoppers.

This year, look for WeChat to continue its overseas expansion efforts, extending new advanced functions and m-commerce to make it easier than ever for international brands, retailers, hoteliers, and malls to get Chinese travelers in the door and increase conversion rates.

1.) 2015 Will Be the Year of the Individual Chinese Tourist.

Building on trends seen over the past several years, 2015 will be the year that the individual Chinese tourist becomes more important to brands and retailers than their group-travel counterpart. The ongoing anti-corruption crackdown has crimped organized group travel among government officials – trips that invariably included high-end shopping excursions. The rise of the independent traveler – typically young, educated, and relatively wealthy by Chinese standards – has been noted by Chinese travel sites such as Ctrip, Caissa, and Qunar, all of which have put more emphasis on tailored experiential travel packages in recent years.

Young tourists have increasingly fueled the emergence of independent Chinese travel. Thirty-eight percent of outbound Chinese travelers are between the ages of 25 and 34, and 67 percent plan to make their own travel arrangements. Additionally, independent travelers have often engaged in group travel in previous years and now opt to go it alone, with greater confidence in their itinerary-building abilities. (A fact that has led to a strong increase in Chinese visits to places off the beaten track.)

Independent travelers are not just important to brands and tourist destinations – they’re increasingly critical, because they influence friends and family, and spend on experiences and accommodations – whereas group travelers typically spend only on shopping trips, skimping on accommodations, food, and experiences.

With many young, digitally savvy Chinese leapfrogging straight to online video, watching 698 million hours of video on Youku Tudou and an estimated 569 million hours on iQiyi this August, the country’s online video market has become big business. As consumers increase their time watching streaming TV shows and films — particularly on mobile devices, which account for around 60 percent of Youku Tudou’s more than 500 million users — the country’s online video market is expected to double in size to $6.5 billion by 2017. In the second quarter of 2014 alone, Chinese online video sites reportedly raked in $662 million in ad revenue, an increase of 43 percent year-on-year.

The rapid emergence of China’s online video market has disrupted the industry not only within China, but around the world, as powerful homegrown players have spent heavily on securing the China rights for foreign film and TV content while investing ever more in producing original content. In the third quarter of 2014, Youku Tudou and iQiyi launched in-house movie studios, and within the next year, iQiyi plans to produce seven local films and 500 web series, up from 300 such series this year. In total, research firm EntGroup expects Chinese video sites to produce 1,700 original episodes this year, a rise of 70 percent over 2013.

For these sites, creating original content is a no-brainer: production costs are around one-third those of traditional programs, and the speed with which concepts can be churned out means producers can quickly jump on hot-button issues and resonate with viewers.

As producers in China pump out new shows, international developments illustrate the growing footprint (and ambitions) of China’s online video market. In the US, home to nearly 275,000 international Chinese students, new Mandarin-language productions such as “Looking For Angels” — which follows a group of young affluent Chinese residents in Los Angeles — provide a window for Chinese consumers to learn about international lifestyles, brands, and fashion. (And for brands to influence these viewers, as they have via Korean television programs with rabid followings in China.)

With Chinese tourist arrivals in the US expected to triple to nearly 6 million by 2020, and overseas spending on luxury items and consumer goods remaining strong, smaller brands in particular may find online video to be a more cost-effective way to attract Chinese shoppers in the US or Europe. Meanwhile, the seamless nature of online video gives brands a new and valuable avenue to tap viewers in China via emerging e-commerce sites and tools like Alipay’s ePass or Asia Checkout.

To discuss “Looking for Angels” sponsorship and partnership opportunities, contact CLA at renee [at] chinaluxuryadvisors.com.

Ideally positioned between China and popular European tourism and business destinations, and linked by dozens of direct flights to major Chinese cities, the United Arab Emirates (UAE) has already benefited greatly from China’s outbound investment and travel boom. In 2013, Dubai saw Chinese arrivals increase 11 percent to nearly 276,000, and more than 81,000 mainland Chinese visited Abu Dhabi in the first nine months of 2014 — a 167 percent increase year-over-year.

According to the Hurun Report, Dubai is the third most popular global destination for Chinese travelers, and the Abu Dhabi Tourism Authority reports that China is now its fourth largest source of foreign tourists. (Trailing only the UK and India among non-Gulf countries.)

Since gaining approved travel destination status from the Chinese government in 2009, Dubai in particular has spent heavily in China promoting itself as an elite destination, linked by easy direct flights and offering tax-free luxury shopping at world-class venues like the Dubai Mall. More recently, Abu Dhabi has taken a more proactive approach, looking to cater to Chinese visitors at The Galleria (which boasts brands such as Alexander McQueen, Balenciaga, and Céline) and offering ample conference space to Chinese companies.

Luxury hotels in the UAE have reported strong growth as well, with the total number of Chinese guest nights in Abu Dhabi increasing 115 percent in the first eight months of the year. Dubai hotels have also pulled out the stops to appeal to Chinese travelers, featuring Chinese buffets and lion dances and handing out red envelopes around Chinese New Year. By all accounts, these efforts are starting to work. This April, Nu Skin China flew 14,500 employees to Dubai and Abu Dhabi for a massive corporate trip that pulled in an estimated $80 million for the emirates, and Dubai reported a 26 percent rise in Chinese tourist visits in the first half of the year.

Despite the positive momentum, a great deal of work remains to be done before the UAE joins Paris, New York, and even Seoul as a top destination among Chinese globetrotters. Mandarin-speaking sales staff remains in strong demand and relatively short supply, and malls, hotels, and restaurants are struggling to catch up with the influx of Chinese guests (and their unique demands). In 2015, the UAE must do more in China to promote more than just luxury malls and shiny skyscrapers, crafting the right message to ensure Chinese tourists feel the need to return again — for more than just tax-free shopping.

The massive growth of China’s outbound tourism market continues to attract the attention of international travel giants, which increasingly look to collaborate with leading local players. Considering the fast pace with which Chinese tourists have scoured (and shopped) the globe — 116 million mainlanders are expected to travel abroad this year, spending an estimated $155 billion — this is perhaps no surprise.

Last week, Turkish Airlines became the latest to tackle the mainland market via a partnership agreement with a Guangzhou travel agency. Chinese tourist arrivals in Turkey jumped 40 percent in the first eight months of the year, driven by younger independent tourists, spurring new urgency among tourism officials and companies to enlist Chinese partners to cater to growing demand.

The moves by Turkish Airlines follow previous efforts by major global online travel agencies (OTAs) such as Priceline (which bought a stake in China’s Ctrip.com in August) and TripAdvisor and Expedia (both of which have local partners in China).

However, investment in China’s outbound travel market is not a one-way street. Driven by their expanding global footprint, Chinese online giants Baidu, Alibaba, and Tencent are in OTA talks overseas, looking to position themselves for continued growth as more Chinese travelers venture abroad (and book travel on their mobile devices).

Looking at the growing appetite for global travel, and the current underdeveloped state of the online travel market, we can expect many more of these partnerships in the years to come. According to the WSJ, currently just 15 percent of Chinese travelers book online, but numbers are rising quickly (29 percent YoY in 2013, according to iResearch). iResearch further projects that China’s online travel market transactions to rise from $36 billion last year to $46 billion this year, continuing to increase to $75 billion by 2017. Clearly an area to watch.

This week, US President Obama announced the signing of a reciprocal visa agreement with China that will increase the validity of short-term tourist and business visas from one to ten years, and student and exchange visas from one to five years. For tourists and businesspeople that regularly travel between China and the US – and the businesses that serve them — the agreement has been hailed as a positive step in US-China relations.

Given the growing economic ties between the two countries, these moves are something of a no-brainer. China remains the world’s fastest-growing outbound tourism market, and one of the ten most important for the US. Last year, 1.8 million Chinese nationals visited the US and spent some $21 billion, in the process supporting an estimated 109,000 American jobs. By 2021, these figures are expected to balloon to 7.3 million Chinese travelers spending $85 billion annually and supporting up to 440,000 US jobs.

Although the US remains near the top of the list of Chinese tourists’ most-desired international travel destinations, only around 2 percent of outbound Chinese travelers visit the US each year. According to surveys of Chinese outbound travelers, ease of obtaining visas is a leading factor in deciding which countries to visit, making a supportive US visa policy key in remaining competitive with global travel markets such as the EU, Japan, and South Korea.

The new agreement is also a boon for Chinese international students in the United States, and the universities and businesses that cater to them. Currently, Chinese students account for nearly 30 percent of all foreign students in the US, and this group has become an important consumer demographic, having spent an estimated $8 billion last year – a 24 percent increase over 2012.

Overall, this new agreement is a positive step for tourists, students, retailers, and tourist destinations alike – good for business in the US and in China. But more specifically, we expect the moves to build on the following trends:

- The US will see more repeat Chinese tourists: The significant lengthening of tourist visas from one year to ten years will make it even easier for Chinese tourists to plan repeat trips back to the US. This will result in a growing number of experienced tourists who are more likely to travel individually, rather than on Chinese tour groups. These repeat visitors will be more sophisticated and naturally seek out unique experiences off the typical Chinese tourist track. (more…)

The world’s largest auto market since 2010, China will surpass the US to become the world’s largest premium car market by 2020. Having entered China when the country had no luxury auto segment to speak of, European luxury automakers Audi, BMW, and Mercedes-Benz continue to occupy 80 percent of high-end market share in China, posing a continued challenge for global players like Lexus, Infiniti, and Cadillac.

As an already crowded premium auto landscape becomes increasingly competitive — and homegrown players maintain protracted efforts to go upmarket — what should automakers do to appeal to China’s evolving luxury auto shopper?

First is to note the changing motivations behind a luxury auto purchase in China. Exogenous factors like conspicuous consumption, status and prestige, the primary drivers of auto sales in the 1990s and first decade of the 2000s, have increasingly morphed into private self-indulgence — seeing one’s vehicle as a symbol for credibility and a reflection of a particular lifestyle. Now, more than ever, Chinese luxury auto buyers demand innovative functions and designs and top-notch after-sales service to increase their personal enjoyment of their automobiles — just like their international counterparts.

These shifting sands present an opportunity for American, Japanese, and British marques to chip away at the market share of the German “big three” — which can no longer depend on their strong brand recognition alone to dominate China.

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It’s been a tough year for some of the world’s largest luxury companies. Prada’s profits slipped by one fifth in the first half of 2014, while Gucci’s second quarter sales fell 2.4 percent, and LVMH sales grew just 3 percent in the second quarter — just half of analysts’ predictions.

Many of these companies place the blame partly on China’s sluggish economy and wariness over ostentatious shows of wealth due to the strict anti-corruption crackdown. Just a few years ago, China was a gold mine for luxury brands looking to easily woo newly minted spenders with logo-ed goods that garnered status and respect in the Mainland.  However, the luxury market looks quite different now than it did in 2010. This is a conundrum for those looking to tap a still young and enticing China luxury market.

According to David Dubois, Assistant Professor of Marketing at INSEAD, when socio-economic factors stabilize, luxury consumption tends to shift from conspicuous to inconspicuous. Indeed, a recent Nielsen survey found that consumers labeled as “overseas luxury consumers” said that self-differentiation and demonstration of taste, as well as better quality, design, and brand heritage, were drivers of luxury purchases This sentiment is particularly high in Tier 1 cities like Beijing and Shanghai, where brands like Louis Vuitton and Gucci are seen by many millennials as their “mother’s brands,” a shift that has left ample room for smaller, niche luxury brands to occupy the market in recent years.

However, reaching these millennials is no small task for niche brands, and takes sustained effort.

First, although brands cannot fully control what is being said about them online, it’s crucial to establish a proactive presence via local social media and online platforms, in addition to operating official Chinese-language brand sites. Nearly 60 percent of respondents in the Nielsen survey said that online platforms were their main source of information about luxury brands, and 50 percent said they regularly consult official brand sites. Brands cannot rely solely on their names alone, as young consumers now have a deeper understanding of luxury goods and more sophisticated consumption patterns than ever before.

Second, luxury brands need to extend their China strategies to brick-and-mortar stores to capture these consumers when they travel overseas. The point is to sell a story, experience, and a lifestyle through the product. According to Frederic Godart of INSEAD, Chinese luxury consumers now look for aesthetic value over status, and stylized buying over status-driven buying. As such, luxury sales to millennials, based on quality, utility, and experience are expected to grow, boosting segments such as children’s toys and clothing, hotels and cruises, wine and liquor, and automobiles. Brands expected to benefit from this growth include Comme des Garçons, Helmut Lang, and A Bathing Ape – all of which combine uniqueness with craftsmanship.

To stay ahead of the game, brands eyeing Chinese millennials should continuously observe and research their consumers and monitor social media, using predictive analytics to identify new and emerging trends in this viral, fast-moving, and ever-changing market.