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.