Published on Monday, September 30, 2013

Is China's new tourism law a cause for concern?

China's new tourism law takes effect from tomorrow and has led some to fear a big shake-up in the Chinese travel sector, with implications for travel and tourism providers overseas. Two experts from ChinaContact - analyst Manuela Barba and managing director Roy Graff - give their views.

Manuela Barba:

"On October 1st, China, while celebrating its National Day, will begin to implement the New Tourism Law of the People's Republic of China, (adopted on April 25, 2013). This law has been a growing concern for tourism operators and travel agencies for the last few months as it may lead to a reshuffle in the tourism sector.

What exactly are the implications of this law and how will the tourism industry, tourists and the environment be affected? Since National Day is one of China's 'Golden Weeks' for outbound travel, the timing has led to increased prices and reduced demand for group packages and as such has elicited strong reactions from travel agencies and receptive operators alike.

China's very first aim is to "protect the legitimate rights and interest of" Chinese tourists who usually suffer a position of weakness compared to tourism operators. (China Daily : New law to Protect tourist's interest). By compelling domestic and outbound tour operators to be more transparent about what is included or not in the packages they sell, this law will improve the quality of the tourism products being offered. "Tourists have the right to get the true information on the tourism products and services they buy." states Article 9; hence no more forced group purchases, unplanned stops in overpriced shops or restaurants, or unexpected add-on fees during the trip. In addition, a whole chapter devoted to dispute settlement elucidates the legal consequences of violating the rights and interests of tourists.

As well as protecting its tourists from being ripped off during their holidays, China intends to change their reputation abroad for the better. (Business Insider: China Is Trying To Make Chinese Tourists Less Embarrassing). Indeed, some recent incidents and bad press involving Chinese tourists gained international attention and even led some to say that Chinese tourists would not be welcome. (The New York Times: Chinese Tourists Spend, and Offend, Freely). As a response Article 13 declares "Tourists shall observe public order and respect social morality in tourism activities, respect local customs, cultural traditions and religious beliefs, [...], protect the ecological environment,..." .

The most concerned are obviously tourism operators which will have to review and adapt their offers so as to abide by this new law and particularly Article 35 which states: "Travel agencies are prohibited from organizing tourism activities and luring tourists with unreasonably low prices, or getting illegitimate gains such as rebates by arranging shopping or providing tourism services that requires additional payment."

Their first observation is that such change as the ban of "zero-dollar tour" where they rely on commissions to make their profit, will compel them to increase their prices up to 80%, thus making customers think twice before buying. ( China's first tourism law makes holidays more expensive ; TTG Asia: Tour prices up with launch of China's anti-zero-fare tour laws). Destinations are therefore afraid of the downfall in the number of Chinese Tourists. (Eturbonews: China outbound tourism expected to be down 40% as of October after new law). So far most travel agencies do not see any positive effect coming with this new law, only the disruption of their long established way of functioning. (Travel Link Daily: China's travel industry not in favour of the new Tourism Law).

With its new tourism law, China aims at regulating the tourism market which is today one of the pillars of its economic growth. If, in the short-term, such disruption in the tourism sector will result in increased prices and in a drop-off in China outbound tourism, mostly for Southeast Asian destinations, in the long term experts agree that Chinese tourists will get used to higher prices since they will experience more enjoyable holidays with better services and better quality. It is also worth noting that this new law will enhance the protection of the ecological environment (Art.4; 13; 21; 42) and the rational use of tourism resources, while promoting the "sustained and healthy development of tourism".(Art.1) (Global Times: Tourism law to enhance cross-Strait cooperation: spokesman)."

Roy Graff:

"From speaking to China-based travel agencies and reviewing the Chinese and global media coverage about the effects and consequences of the new Tourism Law, it is quite obvious that one law that has not been written but is directly related to this one, is the 'law of unintended consequences'. Chinese group tourists have gotten used to extremely cheap package tours over the years. While this has certainly contributed to the amazing growth rate of domestic and outbound tourism, I do not believe that it was beneficial to destinations or provided a full experience to the tourists themselves.

The complaints by tourists about being pressured to shop, being charged unreasonable amounts for various optional activities and excursions is what led the government to enact this law. What is less easy to acknowledge is that Chinese WANT to go shopping abroad and spend more than 60% of their trip budget on shopping. This will not change because of the law, but it may lead to better choices in where and what to shop. We should not forget that the shopping business has massively contributed to this problem by offering generous commissions to tour guides and tour leaders that can earn an astute guide several times their actual salary of guiding fee.

In the short term, we can safely assume that travel agencies in China will try to follow the law and avoid discounting the tours, writing 'free time' in the itinerary instead of 'shopping time'. When the consumers start evaluating the real cost of a tour and checking the alternatives, I believe that we will see big shift to self-organised and independent travel. This trend is already happening in SE Asia and will be speeded up thanks to this law.

Destinations that can spot this opportunity and are able to capitalise on it quickly, will win the affections of the new breed of independent Chinese travellers. I am not speaking just about wealthy Chinese travellers or business people. The new generation of FIT are backpackers, couples, professionals in white-collar jobs. They can figure their way around in English but prefer to use Chinese where possible.

What should destination do?
* Spot the opportunity (through research, consumer testing, social media insight and strategic review)
* Prepare the industry (have Chinese language information and signage, train consumer facing staff in Chinese culture, offer amenities in hotels)
* Engage with the new travellers at inspiration and planning stages (social media and associating known brands with the destination)
* Repeat..."

* ChinaContact with China Edge will host a China outbound tourism workshop and networking reception during WTM week in London in November. To inquire about participation or sponsorship please contact Roy Graff at [email protected]

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