Why Hotels Stand to Gain from the Growth of Chinese Independent Travel

The rise of independent travel in China is real, as a growing number of Chinese travelers opting to book their travels independently of traditional tour groups. With the choice of accommodation left entirely to the travelers, hotels that have yet to really cash in on the Chinese tourism boom stand to profit—and so do hotels already popular with Chinese tour groups.

Chinese tour operators have long preferred to work with properties that belong to large multinational hotel chains that offer an affordable—and consistent—no-frills experience for their customers. For China’s tour operators, scale is important, both in terms of the number of rooms, as well as for driving costs down. Booking guests at numerous smaller hotels prove a logistic challenge in working with tight travel itineraries and makes it impossible to provide an equally satisfying experience for all their customers. The result is that most Chinese group travelers end up staying at nondescript hotels that, while good enough for a night’s sleep, offer little other than a comfortable enough bed and a warm shower.

Capitalizing on the growth of such travel has been far out of reach for both independent hoteliers, luxury hotels, as well more exciting chain hotel properties. For tour operators—who look for low costs, scale, long-term contracts, and reliable quality—hotels competing with something beyond cheap no-frills experiences fall on deaf ears.

Therefore, it should come as no surprise that the growth of Chinese independent travel brings a lot of opportunity for hotel’s that offer something beyond the basics—or even something less than the basics. After all, Chinese independent travelers are not unlike other independent travelers: some look for the cheapest accommodation available—even if it’s a dormitory bed in the hostel—while others look for a luxurious escape or perhaps an ecotourism retreat. With the middleman—the Chinese tour operator—out of the picture, all the factors that tourists’ usually take into account when picking accommodation come into play again.

Even though that’s great news for hotels that cater to niche types of tourists, as well as accommodation providers on both ends of the pricing spectrum, what does it mean for the hotels that have been serving a great number of Chinese tour groups?

While 50 beds regularly filled by Chinese tour group travelers serves a reliable revenue stream for no-frills hotels, it comes at a cost. Chinese tour operators aren’t shy to take advantage of the scale that they offer, and the negotiated rates are always far below the listed price for the rooms they occupy. Even though it makes little difference in times of excess capacity, at other times, it leaves rooms occupied for a price far below the going rate in the market.

As one would expect, a common complaint among hoteliers that serve Chinese tour groups is that tour operators are extremely price sensitive, but that there’s little that can be done about it in a buyer’s market. In places where accommodation is scarce, such as Japan, tour groups often opt to put their customers in cheap hotels outside the cities—or between stops on the itinerary—instead of paying a premium for better location. Another common complaint is that Chinese tourists on group tours cause a nuisance to other guests, in part because the number of people who arrive at once, as well as since they often arrive in their buses late at night when other guests are sleeping.

For hotels serving Chinese tour groups, the allure of replacing their extremely cost conscious group tourists with Chinese independent travelers is strong. With the small margins they operate under with group travelers, it would take far fewer than 50 independent travelers paying market price to replace the revenue stream that 50 group travelers bring—making independent travelers a highly attractive prospect even for hotels that already serve a substantial number of Chinese tourists.

The same also rings true for other tourism businesses: sights, museums, restaurants, and stores beyond the mainstream all stand to gain from the growth of Chinese independent travel. For businesses that already serve a large number of Chinese tour groups, avoiding tour operator commissions and below market price rates for a larger share of their Chinese customers is a welcome change of pace as well.

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Hotels & Accommodation, Travel