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Illusive tiger, mythical dragon

Approved destination status and the realities of Chinese tourism. Local councillor Ralph Forsyth wades in.

By Ralph Forsyth

According to a recent Canadian Press article the Chinese government is not very happy with Canada: “China is threatening to use its considerable economic strength to penalize Canada following the Harper government's decision to bestow honorary Canadian citizenship on the Dalai Lama.”

Honouring dissidents is nothing new for Canadians. South African leader (and former prisoner and dissident) Nelson Mandela has also received honorary Canadian citizenship. What concerns some Canadians about the Chinese “threat” is the fact that after the United States, China is Canada's largest trading partner.

Amplifying the distress, is the desire of the Canadian tourism Commission to acquire Approved Destination Status. ADS enables select Chinese citizens to travel for pleasure to countries with this status. Every country wishing to acquire ADS must negotiate individually with the China National Tourism Administration (CNTA) in order to be granted ADS. Simply put ADS is a must have if Canada hopes to attract more Chinese tourists.

Pulling the tiger’s tail might not be the wisest move if you want more Chinese visits, and many believe that Chinese tourism is the great panacea that will cure all our tourism-related problems. But recent evidence suggests that Chinese tourists spend the majority of their tourism dollars on gambling and high fashion shopping, and prefer discount hotels. According to Chinese tourism consultancy CLSA Asia-Pacific Markets special report, “Almost 70 per cent of their budget is allotted to this (shopping) activity. And they choose to finance this by cutting down on accommodation expenditure.”

If we dig a little deeper the question of why should we care about ADS begs to be asked. Chinese tourism as the next great revenue generator may be as big a myth as the existence of dragons.

The Myth of ADS

Early in 2006 Canadian officials were boasting about our country’s imminent ADS status in negotiations with China, but so far there has been no formal announcement. Negotiations are still ongoing, however, there is no date in sight for such an agreement.

It’s understandable that Canadian Tourism Commission (CTC) officials might be excited and jump the gun on an announcement; ADS could be a big step forward for any country wishing to tap into a fast-growing Chinese outbound tourism market that boasts some impressive statistics. There are 200 million Chinese today that are able to travel overseas. In 2005 outbound tourist numbers reached more than 31 million and could reach 100 million by 2020. There are nearly 700 licensed outbound travel agencies in China out of more than 10,000 agents. And according to the CTC, Chinese visitor numbers will grow by 25-28 per cent every year after a country receives ADS. Canada’s present annual growth is about 15 per cent.

Currently, only Chinese traveling on business or visiting their families in Canada can obtain exit visas. Despite this barrier Canada received 117,490 visitors from China's mainland last year.

Since 1983 81 countries have been granted ADS. The list includes many of the world’s tourism superpowers (England, France, Australia, New Zealand) but also some of the most repressive regimes on the planet (Zimbabwe, Myanmar, Kenya ). The fact that Canada is absent from the list should come as a surprise, given the amount of trade between the two countries.

Our country’s commitment to respect for human rights may be a reason that the Chinese government is so reluctant to grant ADS. In a recent letter to Whistler’s Mayor, Peter MacKay Canada’s Minister of Foreign Affairs, clarified the governments position: “A central goal of Canada’s foreign policy towards China is strengthening respect for human rights and rule of law in tune with its commitment to a principled approach to foreign policy. Canada consistently raises its human rights concerns during regular dialogues with Chinese officials at all levels and calls on the Chinese government to respect the two United Nations human rights covenants it has signed.”

The reality is that ADS negotiations are highly politicized.

Roy Graff is the Managing Director of China Contact, a tourism business development company based in China. His company helps tourism operators and marketing agencies navigate the complex waters of targeting and attracting the potential 1.3 billion Chinese tourists, and how to design products and train staff to satisfy these consumers. When asked for his on the ground perspective about our expectations of achieving ADS his replies were refreshingly honest: “It is not realistic as negotiations have stalled over political issues and possibly cultural and communications problems.”

The process of ADS approval has been tied to political relations from the beginning. China awards this status to countries it wants to win favours from or has very good relations with. Hence countries in Asia received it first. Australia and New Zealand received it while negotiating Asia Pacific trade agreements.

Following the Harper government's decision to bestow honorary Canadian citizenship on the Dalai Lama, Chinese officials have hinted at repercussions that may be harmful economically. Typically negotiations of this kind are done on a case by case basis, but when dealing with the world’s last great communist power the real issues become obfuscated by a bizarre diplomatic process.

The Yin and Yang of the “new” China is exemplified in its eagerness to become a world leader tempered by a highly charged paranoia and insecurity about the outside world.

Guan Xi

The People's Republic of China was founded in 1949 under the brutal repression of Communist dictator Mao Zedong. Following the revolution all capitalist institutions and companies were nationalized (for example, from 1950 to 1978, China had just one bank). China opened up to the world in the late 1970s and 1980s under Deng Xiaoping, but in the late 1990s the government (while still repressing political freedom) showed a willingness to develop free-market principles. In 1997 the Chinese government sanctioned overseas leisure travel. Today China boasts one of the world’s fastest growing markets, with more consumers than anywhere else on earth.

Much of the world’s media attention is focused on China's exploding economic growth, with little attention given to the communist legacy of corruption and mismanagement, and the mountains of bad loans it’s piling up. Despite these shortcomings, and barring any major political crises, the economy looks set to continue apace.

Travel and tourism is often an effective barometer of economic development. If the average per capita income reaches a certain point then tourism can flourish, as happened in Japan. But don’t count on the Chinese to emulate the free-spending Japanese visitors who lifted global tourism revenues in the 1980s.

James McGregor’s “One Billion Customers” and Wolfgang Georg Arlt’s China's Outbound Tourism” are two recent books that expose the realities of doing business in China, and some of the tourism trends we can expect from these visitors. Their evidence suggests that most first-time travelers from the mainland are deeply frugal and tend only to visit the most famous attractions. They prefer Chinese food and the cheapest hotels. According to an Economist magazine article in June 2006: “Chinese tourists are willing to put up with hard beds and cold noodles for a reason: they are champion shoppers who prefer to concentrate their spending on luxury branded goods, which are cheaper than back home and guaranteed not to be fakes. In 2005 they spent more on shopping, per day and per trip, than travelers from Europe, Japan or America.”

The Chinese appetite for shopping is equaled only by a lust for gambling.

Unless Whistler intends to become more like Milan or Las Vegas we will have to adapt if we wish to make the most of Chinese visits. Roy Graff suggests that Whistler will need to re-design its products and services to accommodate Chinese tourists . “You have to design with the Chinese customer in mind, and consider that China has diverse markets with different expectations and needs different niche segments based on income, educational background and location.”

One recurring theme when researching China is the concept of “Guan Xi” (pronounced guan hsi). Graff explained its significance when doing business in China. “It means 'relations' but has all kinds of meaning in Chinese culture. I cannot go into all the history of this as it is as long as the Chinese culture. In short, Chinese believe in working with people they trust and do not separate personal life from business life. There is a reverence to hierarchy so having good contacts at the top (company boss, government department) always helps move things further down.”

James McGregor takes a much more cynical view of the term, describing the concept as: “overrated, temporary and non-transferable. Never ever put your business in the position where you are dependent on one individual for access to government officials.”

Graff offers common sense advice on the topic: “Building good relations with foreigners is much more difficult due to the culture and language gaps, but not impossible — it takes time and commitment to the market.

Knowing how to negotiate in this environment and develop strong, close relationships with the right partners is a skill that takes years to develop.”

Tourism Whistler is taking an interest in the Chinese market but is wisely not over estimating its potential. According to Michele Comeau Thompson, director of communications for Tourism Whistler, “…our approach to this market is that we are at the table and have a Whistler presence in the Canada- and B.C.-wide initiatives in China, as well as with the trade and media groups that come over to familiarize themselves with the Whistler destination. But we are definitely not focusing heavily on this market. There is interest from Chinese visitors in Whistler but without approved destination status allowing non-business travelers to come to Canada, and no news on this in sight, we are setting the groundwork for leveraging opportunities in this market while being careful not to take focus away from our other key or growth markets.”

Graff suggests an understanding that cultivating this market takes time. This is concurrent with Tourism Whistler’s approach as well. Breton Murphy, manager of community and media relations explains their tactics: “We are in the process of garnering the awareness and interest within the Chinese market required to truly leverage this opportunity, but this will not be achieved overnight. Our commitment to attracting visitors from China is definitely part of a long-term effort — and one which has been part of our marketing and sales strategy for several years.”

Whistler has built its reputation as a world class ski, golf and outdoor adventure resort. These product offerings are not of interest to the average Chinese tourist, but there are a few opportunities that can be seized. Graff suggests that: “Sampling new activities in a managed and low impact manner can be attractive. Targeting the niche markets of ski and golf in China is possible. Offering corporate packages for meetings and conferences that include some leisure pursuits.”

This idea is echoed by Murphy. “The meetings and incentive market is also a key area of opportunity which we have been actively targeting. The feedback we’ve been receiving from Chinese meeting and incentive groups suggests a real appreciation for many of our distinct attributes — especially the unique combination of a pedestrian village with an urban selection of hotels, restaurants and shops.”

Yin and Yang

The World Travel and Tourism Council predicts that China will be second only to the United States in outbound tourist visits, and forecasting by The World Tourism Organization estimates that there will be 100 million Chinese traveling overseas by 2020.

Research from Tourism Whistler indicates that interest in snow sports is growing in China. There are an estimated 1.5 million Chinese people being introduced to skiing each year.

When looking at these statistics it is tempting to believe that the future lies with Chinese tourism. However, consider some other facts: Currently only 2.1 per cent of the population is allowed to take overseas trips. According to Roy Graff, “Despite the hype from tourism boards and exhibition companies, most tourism fairs are dogged by low public attendance.” Of the 31 million Chinese who traveled “overseas” last year 21 million went to Hong Kong and Macau, both “special administrative regions” of the Peoples Republic. Technically those 21 million people never really left the country.

The actual number of Chinese tourists who are genuinely “international” is much smaller. Research from Tourism Whistler shows that only 6 per cent of all Chinese skiers own their own equipment. All evidence suggests that getting Chinese travelers to spend is difficult. There is money to be made but far less than the headlines and hype suggest. Whistler will need to adapt quickly and intelligently to the demands of Chinese visitors; but we need to be patient.

The factor that needs to be incorporated into doing business in China is the strong hand of political leaders in the tourism sector. Interference from the government is pervasive, and it should not be forgotten that China is governed by a regime that can be brutal and repressive. There is cause for optimism. Engaging the Chinese market will benefit the Chinese people and be profitable for business, but we must be clear that business must be done on our terms and be consistent with our values.



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