China's Economy: Four Dishes and One Soup.

President Xi Jinping’s famous phrase encouraging restraint in Chinese government spending has had some effect. However, the recent rise in China’s GDP has been driven by increased infrastructure spend, not domestic demand. China’s civil servants might be enjoying fewer banquets and hotel stays but they’re having trouble cutting back on the bridges and railways.

This may in the medium term be bad news for China’s economy, which leading economists judge as in need of rebalancing. In the Chinese hotel and travel market, the 2013 China Hotel Guest Survey from BVA BDRC reported that a rise in international business travel had been balanced by a fall in domestic business travel volumes and participation, down a painful 8% to 1,971 million room nights.

However, hoteliers were taking comfort in the growth of leisure travel, fuelled by the continued growth in prosperity among metropolitan Chinese. The increase was not huge though – 201 million participating adults (+4%) accounting for 1,993 million room nights (+3%). Most stays were short breaks, of course, up 12% at the expense of longer stays. All those new railways and bridges will help people to move around as well as goods, so continued growth in the domestic hotels market is a safe call. With more money and more places to get to, Chinese consumers will be visiting more of their vast country.

International (outbound) business volumes were up, perhaps because of the drive for exports – or maybe all those minerals joint ventures in developing countries take a lot of managing. Chinese business travellers were certainly spending more time abroad; +20% to 314 million room nights. The profits from Chinese economic growth are being spent by many more international leisure travellers, renowned as enthusiastic shoppers. All those Gen X/Y girls who grew up with the Spice Girls’ consumerist anthem “I tell you what I want, what I really, really want” are living the dream now! There were 7 million extra international leisure travellers last year, up 22% to 39 million travellers – more than the whole population of California – staying for 762 million room nights. Mostly they stay in Asia Pacific, but slightly fewer than 1 in 5 Chinese leisure travellers claimed to have spent a 5+ night stay in the USA in the last year, the same proportion for Western Europe. For Western governments, tourist boards and hotel operators, driving up this number must clearly remain a priority.

Shangri-La remained the No. 1 ranked brand, though Hilton took their No. 1 Leisure Brand crown. Most improved brand was Ibis, seeing increased awareness and customer recommendation. The most widely used brand in China, 7 Days Inn, improved its overall brand ranking from 5th to 3rd, with Home Inns moving up fast behind it from 9th to 5th. Hanting Inns and Hotels joined the top 10 brands overall this year while Jiang Hotels returned to the Top 10 with improved loyalty and recommendations. Talking of which, what are the dominant emotional drivers for Chinese travellers?

Both business and leisure expected their rooms to be comfortable and trustworthy as well as wanting a great night’s sleep. These functional drivers point towards a focus for operators on the bedroom environment, though you wonder if the relentless pace of urban construction has habituated too many travellers to having nights broken by construction noise – something beyond the control of most operators.

Usage of online travel agencies (OTAs) was higher in China than in many of the more developed Western hotel markets: more than half of all Chinese leisure travellers used OTAs as a hotel room booking channel, with local brands such as CTrip and eLong (part of Expedia) leading the market. Overall, more than 80% used the internet for information sources. That will be Gen X and Gen Y, one would conclude.

Baby Boomers accounted for only 10% of domestic leisure market volume and 15% of the domestic business market (and this is from the metropolitan population, not the countryside). A sobering thought – Baby Boomers in the USA and Europe mostly enjoyed growing prosperity, good food, free education and great healthcare. The good times really rolled. Our contemporaries in China were seeing privation and suffering on a vast scale, witnessing the disaster of the Great Leap Forward, separated from their parents, uprooted from their homes by the Cultural Revolution, their education replaced by back breaking peasant labour. President Xi is one of that generation. We might conclude they have earned the material comforts they and their children now enjoy.