Page 286 - 2017 White Paper
P. 286
7 White Paper on the Business Environment in China
Those factors still have not disappeared, however: international luxury hotel brand may yet be arriving in
According to Fitch, four in 10 rooms still sit empty in the years to come (Fuller 2016).
China as a result of the aforementioned overexpansion.
Still, official figures show 1.65 trillion yuan was spent How Chinese travelers are booking their trips is also
on domestic travel in the first half, up 14.5% year-on- making significant changes in the travel industry. Jing
year. While an increasing amount of Chinese tourists Daily notes that Alibaba’s travel platform, Fliggy (formerly
are traveling abroad, domestic tourism still accounts called Alitrip), has become one of the main success
for more than 80% of China’s travel expenditure. Fitch stories of Singles’Day in the last few years—and 2016 was
analysts forecast double digit growth to continue for no exception. Transaction volume on the marketplace
the coming five years, as domestic destinations become reached US$316.7 million during Singles’ Day 2016, up
more attractive and accessible and more households from US$221.5 million in 2015. While growth on the
acquire the means to travel. platform reached nowhere near the 200 percent growth it
saw between 2015 and 2014, the growth of sales of travel
Meantime, cruise tourism, introduced to China fewer products still outpaced overall growth by a significant
than 10 years ago, has seen rapid growth. In that time, margin—in spite of growing competition. And growing
“five terminals have been built at an estimated cost of competition there is. Most, if not all, of Alibaba’s major
more than 4.5 billion yuan ($735 million)”, with “three competitors in the travel space ran Singles’ Day specials
[more] under construction and another six [in] the on their platforms, including industry juggernaut Ctrip
pipeline” (Yap 2013). and main rival Qunar (Meesak 2016). The competitive
landscape for travel companies on Singles’Day highlights
Despite expanding capacity and nearly 10 percent the increasingly competitive Chinese travel marketplaces
growth in port calls by international cruise lines, China as well as the increasing commoditization of hospitality
Cruise & Yacht Industry Association vice president Zheng and ravel products in China (Ibid.).
Wei-hang told Reuters that rapid construction had
eliminated profits and that “all five established cruise Catering
terminals have suffered losses mainly as a result of
excessive investment by municipal authorities in building The other end of the hospitality spectrum, catering,
landmark structures that have yielded insufficient returns” has (and will likely continue to) see strong growth as
(Yap 2013). well. “Yum!”, the management group primarily known
on the Mainland for its Pizza Hut and KFC franchises,
Meanwhile, Chinese outbound travelers are in 2009 stated its intent to open 500 new restaurants
transforming global travel and hospitality industry, with that year—one-third of its total worldwide openings
100 million Chinese now traveling outside of China and (Baertlein 2008). Similarly positive, Yum!’s second quarter
industry leaders expecting this number to grow to 200 2010 earnings were up 33 percent in China, compared
million in the next five years or less. Forbes reported that to 10 percent in the United States (Rooney 2010). More
Chinese hospitality companies have been taking note recently, the company opened 92 additional restaurants
and starting to invest heavily overseas, such as Dalian in the first quarter of 2011 and saw its adjusted operating
Wanda (which shelled out US$ 1 billion for a London profits grow 18 percent (China Daily 2011b).
luxury hotel and US$900 million for a Chicago skyscraper
which includes a hotel, luxury apartments and retail) Despite “same-store sales in China [dropping] 4% in
and Jin Jiang (splurging US$1.2 billion for Europe-based the fourth quarter [of 2012], compared with a jump of 21
Louvre Hotel Group), even corporates such as Anbang percent the same period a year earlier”, Yum!’s intent to
Insurance which coughed up nearly US$ 2 billion for the open 700 stores over the course of 2013 was reported by
iconic Waldorf Astoria in Manhattan). These companies the Wall Street Journal in December 2012 (Burkitt 2012).
are banking on the expectation that their countrymen
will provide a solid customer base from which they can Competitors McDonald’s is reportedly aiming to reach
draw as they expand abroad—just as US and European 2,000 outlets across the nation by 2013, having increased
travelers provided the foundation and impetus for the investment in 2010 by 25 percent and planning a further
massive global expansion of their own home-grown, 40 percent increase in investment over 2011 (Wei and
powerhouse brands like Hilton, Sheraton, Accor, Marriott Conley 2011). In August of that year, the company
and others several decades ago. The age of a truly Chinese
286
Those factors still have not disappeared, however: international luxury hotel brand may yet be arriving in
According to Fitch, four in 10 rooms still sit empty in the years to come (Fuller 2016).
China as a result of the aforementioned overexpansion.
Still, official figures show 1.65 trillion yuan was spent How Chinese travelers are booking their trips is also
on domestic travel in the first half, up 14.5% year-on- making significant changes in the travel industry. Jing
year. While an increasing amount of Chinese tourists Daily notes that Alibaba’s travel platform, Fliggy (formerly
are traveling abroad, domestic tourism still accounts called Alitrip), has become one of the main success
for more than 80% of China’s travel expenditure. Fitch stories of Singles’Day in the last few years—and 2016 was
analysts forecast double digit growth to continue for no exception. Transaction volume on the marketplace
the coming five years, as domestic destinations become reached US$316.7 million during Singles’ Day 2016, up
more attractive and accessible and more households from US$221.5 million in 2015. While growth on the
acquire the means to travel. platform reached nowhere near the 200 percent growth it
saw between 2015 and 2014, the growth of sales of travel
Meantime, cruise tourism, introduced to China fewer products still outpaced overall growth by a significant
than 10 years ago, has seen rapid growth. In that time, margin—in spite of growing competition. And growing
“five terminals have been built at an estimated cost of competition there is. Most, if not all, of Alibaba’s major
more than 4.5 billion yuan ($735 million)”, with “three competitors in the travel space ran Singles’ Day specials
[more] under construction and another six [in] the on their platforms, including industry juggernaut Ctrip
pipeline” (Yap 2013). and main rival Qunar (Meesak 2016). The competitive
landscape for travel companies on Singles’Day highlights
Despite expanding capacity and nearly 10 percent the increasingly competitive Chinese travel marketplaces
growth in port calls by international cruise lines, China as well as the increasing commoditization of hospitality
Cruise & Yacht Industry Association vice president Zheng and ravel products in China (Ibid.).
Wei-hang told Reuters that rapid construction had
eliminated profits and that “all five established cruise Catering
terminals have suffered losses mainly as a result of
excessive investment by municipal authorities in building The other end of the hospitality spectrum, catering,
landmark structures that have yielded insufficient returns” has (and will likely continue to) see strong growth as
(Yap 2013). well. “Yum!”, the management group primarily known
on the Mainland for its Pizza Hut and KFC franchises,
Meanwhile, Chinese outbound travelers are in 2009 stated its intent to open 500 new restaurants
transforming global travel and hospitality industry, with that year—one-third of its total worldwide openings
100 million Chinese now traveling outside of China and (Baertlein 2008). Similarly positive, Yum!’s second quarter
industry leaders expecting this number to grow to 200 2010 earnings were up 33 percent in China, compared
million in the next five years or less. Forbes reported that to 10 percent in the United States (Rooney 2010). More
Chinese hospitality companies have been taking note recently, the company opened 92 additional restaurants
and starting to invest heavily overseas, such as Dalian in the first quarter of 2011 and saw its adjusted operating
Wanda (which shelled out US$ 1 billion for a London profits grow 18 percent (China Daily 2011b).
luxury hotel and US$900 million for a Chicago skyscraper
which includes a hotel, luxury apartments and retail) Despite “same-store sales in China [dropping] 4% in
and Jin Jiang (splurging US$1.2 billion for Europe-based the fourth quarter [of 2012], compared with a jump of 21
Louvre Hotel Group), even corporates such as Anbang percent the same period a year earlier”, Yum!’s intent to
Insurance which coughed up nearly US$ 2 billion for the open 700 stores over the course of 2013 was reported by
iconic Waldorf Astoria in Manhattan). These companies the Wall Street Journal in December 2012 (Burkitt 2012).
are banking on the expectation that their countrymen
will provide a solid customer base from which they can Competitors McDonald’s is reportedly aiming to reach
draw as they expand abroad—just as US and European 2,000 outlets across the nation by 2013, having increased
travelers provided the foundation and impetus for the investment in 2010 by 25 percent and planning a further
massive global expansion of their own home-grown, 40 percent increase in investment over 2011 (Wei and
powerhouse brands like Hilton, Sheraton, Accor, Marriott Conley 2011). In August of that year, the company
and others several decades ago. The age of a truly Chinese
286
