China Hits the Road

With the assistance of a taxi driver and after several hours on a train with his family, Kang Liqin finally found a hotel with vacant rooms.

While clean and comfortable, this two-star hotel saw a 40-percent rise of its price during the May Day “golden week.” The taxi driver highly recommended the hotel, saying Kang was “very lucky” to find accommodation in Hangzhou. The city, known for its scenic attractions, was packed during the holiday.

“Many tourists are sleeping on the street,” said the taxi driver.
Kang took the advice of the driver. She and her family had been to five hotels--all booked--before finding this one. Less than an hour after they settled in, the hotel was also out of rooms.

Over the next two days, as her family toured the city, Kang was able to see the so-called “golden tourism week” first hand. Tourists were everywhere. Once the family had to wait an hour for an open taxi.

Lines were long in front of scenic spots that were packed with holiday photographers. Sometimes it didn’t take much effort to walk--the push of the crowd moved the family along in a human river.

“We came to enjoy the scenery, but most of the time we just saw the back of the heads of other tourists,” complained Kang.

And according to the Hangzhou Statistics Bureau, there were a lot of heads to see. Around 7.6 million tourists came to the city during the recent May Day holiday--nearly equal the number of its permanent residents. The Hangzhou Tourism Administration reported that hotels, restaurants, transportation services and scenic areas all operated beyond their capacity.

Hangzhou wasn’t the only place to witness extraordinary holiday migration. Beijing, for instance, saw an influx of 4 million tourists, and about 1.8 million Beijingers left the capital city for the holiday.

According to the National Tourism Administration (NTA), during the holiday, 179 million Chinese traveled across the country--an increase of 36 million from the previous year--filling major scenic spots and transportation routes to full capacity.

Domestic tourism boom

In less than two decades, China has developed the world’s largest domestic tourism market, said NTA Deputy Director Wang Zhifa.

“Tourism in China has experienced three stages of development,” said Wang. “It began from mainly hosting foreign guests and becoming a source of China's foreign currency reserves to develop into the present domestic market dominated by Chinese tourists.”

In 2006, the tourism sector registered 620 billion yuan in revenue from 1.39 billion individual Chinese tourists, a year-on-year growth of 17 and 15 percent respectively. For the first time, the growth of domestic tourism revenue exceeded that of GDP.

“Tourism has become the third most important family consumption, next to housing and automobiles,” said Wang Maolin, Deputy Director of the China Society of Urban Economy. “It enjoys a huge market potential.”

A study released by the World Travel and Tourism Council (WTTC) on China’s tourism and travel economy predicts that income from tourism will account for 2.5 percent of the country's GDP in 2007. The study also optimistically forecasted that the tourism sector would see average sustained annual growth of 10.4 percent over the next decade.

According to the 11th Five-Year Plan, by 2010 the number of domestic tourists will reach 1.78 billion, with tourism revenue surpassing 1.22 trillion yuan and accounting for 7 percent of the GDP. In 2015, the number of domestic tourists expects to exceed 2.6 billion, with tourism revenue hitting 2 trillion yuan.

“This constitutes an enormous market,” said Shao Qiwei, Director of the NTA. “It will become a significant industry.”

Open tourism markets

The growing Chinese tourism industry is not only exciting domestic travel agencies. Foreign agencies are eager to get in the game as well.

Under WTO commitments regarding opening its tourism sector to outside competition, China has to allow foreign investment in travel agencies and lift restrictions on where those travel agencies could locate by November 2007.

“In fact, tourism is among the earliest industries to open extensively to foreign investment,” said Wang Zhifa. In July 2003, the NTA fulfilled its WTO commitments four years ahead of the deadline and approved the establishment of the first wholly funded foreign travel agency, Jalpak International (China) Co. Ltd., in Beijing.

Apart from Jalpak International, U.S. business travel giant American Express established a joint venture with the China International Travel Service in 2003, and the German giant CAISSA Touristic (Group) AG invested 30 million yuan in CAISSA (China) Investment Co. Ltd. in 2006 to provide travel agency, airline and e-commerce services. Currently, there are 10 joint ventures or foreign-funded travel agencies in China.

Some domestic travel agencies have embraced the news. Chen Rong, Vice President of the CITS Group Corp., believes the lifting of restrictions will provide opportunities for domestic companies to cooperate with foreign investors.

“With consideration to the advantages of local travel agencies, foreign investors will prefer joint ventures to wholly owned companies, hoping to make the most out of respective strengths and participate in the management of major travel agencies in China,” said Chen.

In the long run, Chen believes that opening the market to foreign investment is conducive to the development of the domestic travel market and will help speed up the division of labor within the industry.

Yet, some worry about the competition.

“If foreign investors acquire major travel agencies, it will have a great impact on the rest of domestic companies,” said Zhan Lei, spokesman for Spring International Travel Service. Spring International Travel attempted to partner with Rosenbluth in the 1990s on the founding of branches in China, but failed to see any fruitful results from the venture because of “ idea clashes,” according to Zhan.

Room for improvement

Despite the rosy prospects, there are problems within the travel sector. Weak infrastructure and a slow pace of development of public facilities have failed to keep up with the growing demands for transportation and accommodation within the travel market, said Wang Maolin.

Tourist Kang Liqin agrees, saying, “Some cities advertise nationwide for tourists, but their capacities are limited.” Complaints the NTA has been receiving indicate disputes between tourists and travel agencies have increased due to insufficient infrastructure at tourist destinations.

Wang Maolin believes that the excessive exploitation within the travel market has destroyed part of the resources--a pressing problem for the industry which could do it much harm in the future.
“Some scenic areas are building high-profile hotels, restaurants and entertainment facilities to pursue short-term economic returns at the price of the sustainability of tourist resources,” said Wang. “It’s quite short-sight.”

In addition, tourists who lack a sense of environmental protection and cultural awareness have endangered the longevity and original look of ancient relics by engraving their names or climbing on them.

Wang calls for the sustainable development of travel resources, a development plan of national tourism resources and the drafting of related state regulations and rules to guide and coordinate the use of tourism resources.

Shao Qiwei holds similar opinions. He said the NTA would encourage companies and institutions to train management teams with international outlook and a spirit of innovation to prepare for competition in the global tourist market. He said the NTA, to facilitate the development of information and networks, would use hi-tech solutions to coordinate and monitor the development of tourism resources, and ensue the sustainability of the Chinese tourism industry.

“At the same time, we must improve the quality of service,” Shao added. “In particular, we must strengthen the training of frontline employees including those in hotels and restaurants, as well as tourist guides, to broaden their horizons and enhance their skills and services.”