McKinsey plays mythbuster on Chinese traveller misconceptions

03 December 2018

Global strategy & management leader McKinsey has in its latest survey report set out to dispel a number of persistent misconceptions about the average Chinese tourist.

More than 160 million: that’s the projected annual number of Chinese international trips that will be taken in a little over a year or so from now. The figure has already eclipsed 130 million as of last year, not to mention the some 4 billion trips taken in-country. Yet, according to management giant McKinsey, the Chinese tourist myths abound; shop, shop some more, snap the landmarks, dine on Chinese fare alone.

In a new survey taken with more than 2,000 Chinese tourists, the firm says that these old tropes should be forgotten – Chinese tourists are broadening their horizons in many ways. And, with outbound Chinese tourists projected to spend around $315 billion in 2020, forking out the largest average spend per trip of any nationality, travel agencies and associated industry stakeholders such as travel-oriented retailers and hoteliers would do well to take note.Numbers and expenditure of Chinese outbound travel

First, the figures. Chinese outbound tourism has become the largest tourism segment in the world, with the number of outbound trips doubling between 2010 and 2015 to 117 million at a compound annual growth rate of 15 percent. Since then, the figure has risen to an estimated nearly 140 million this year, set to jump again to 160 million in 2020. It’s easy to see where this trend is heading, fueled by a combination of higher incomes, greater international exposure, easier visa arrangements, and access to online information.

And it’s not only the number of travelers, but their spending habits. The Chinese spend big when abroad, the most profligate of the global mobile. Average expenditure per trip stands at around $2,000, with a collective outlay currently pushing the $250 billion mark and expected to remain reasonably steady as the figure rises to $315 billion in 2020, the average per trip dropping only slightly as more citizens from tier 3 and 4 Chinese cities begin to enter the market.Chinese travel myths busted

A boon for overseas luxury retailers, souvenir shops, and dumpling stalls alone? No, says McKinsey, according to the results of its survey, which detected eight particularly myths or obsolete ideas about the average Chinese tourist that persist within the industry. As to the most prevalent, no, not all Chinese tourists are keen on shopping; they are willing to try exotic foods, and; expeditious visits to landmarks are no longer the primary goal, with younger Chinese travelers preferring to take their time.

It may be a familiar sight to many travelers visiting natural and cultural sight-seeing hot-spots around the world. A bus-load of Chinese tourists arrive, disembark, linger just long enough to add to their memory-cards, and then disappear off to the next must-see spot. Like many of the ruins and monuments of attention, this sight might soon also become a relic of the past. Millennial Chinese travelers, especially those aged between 20 and 24, have developed a preference for self-guided or semi-self-guided tours.Tour style preferences of Chinese travelers by age group

As per the McKinsey survey, 44 percent of the travelers surveyed in the 20-24 age bracket prefer self-guided options, compared to only 27 percent of the Chinese senior citizens above 60 years of age. For the younger cohort, semi-self-guided or contained tours at local destinations account for another almost 40 percent of preferences, with package tours of 10 to 20 people favoured by just 4 percent. The latter figure for the plus-60 demographic is 30 percent.

Yet, McKinsey is quick to caution that a taste for package tours won’t disappear altogether as the older generation of tourists is replaced. Indeed, as Chinese tourists travel more frequently and farther from home, a growing trend expected to pick up pace with greater experience and exposure to long-haul destinations, semi-self-guided and high-end package tours are projected to rise with the demand for customization and flexibility. Also, the further the destination from China, the more likely language and cultural barriers will lessen the experience without a guide and translator.

All in all, it leads to one point that should already be evident; not all tourists from any nationality are homogeneous in their tastes, habits and desires, especially as a segment matures. From the survey data-set, McKinsey identified eight distinct categories of Chinese tourists, as follows; value-seeking sightseers, individualists, sophisticates, aspirants, novices, ‘unpluggers,’ (typically stressed middle income earners simply looking for an escape without other clearly defined needs), backpackers, and shoppers.Chinese traveller archetypes

Related: Chinese consumers increasingly turn to mobile for their shopping.

Hotel chain OYO hires management consultants for top international posts

11 January 2019

Hospitality start-up Oyo has turned to a trio of former management consultants to head up its expanding country operations, with key hires Ming Luk Tan in Malaysia, Jeremy Sanders in the UK, and Andrew Verbitsky as Head of Europe.

Founded in just 2013, Oyo has since grown to become India’s largest hospitality group, operating in more than 200 cities across India with a network of 8,500-plus hotels – through a disruptive platform model of hotel branding combined with an online booking app. Now the company has set its sights on the rest of the world, with founder and CEO Ritesh Agarwal recently declaring that by 2023, Oyo “will be the world’s largest hotel chain.”

The 24-year-old promptly backed that claim by raising $1 billion in investment from SoftBank, Sequoia Capital and Lightspeed Venture among others, and with that backing has sent the unicorn on an aggressive international expansion – recently setting up or expanding operations in China, Southeast Asia, the Middle East, UK, and continental Europe and making key personnel appointments across the globe; among the latest, three former management consultants.

Ming Luk Tan

Named as Oyo’s new Head of Malaysia, where the firm has been operating since 2016, Ming Luk Tan joins after serving as the head of local of bike-sharing platform ofo, before which he led Axiata Digital’s Ignition Labs. Earlier in his career, he was a Senior Consultant with McKinsey & Company, spent three years as a Manager at Accenture, and kicked off his professional life with a five year stint at Ernst & Young, rising to manager in the firm’s business advisory practice.

Hotel chain OYO hires management consultants for top international posts

Andrew Verbitsky

On the other side of the globe, Andrew Verbitsky has been appointed as Head of Europe, with Oyo making an early push into Portugal and Spain. Verbitsky joins after close to seven years leading digital tourism and hospitality start-ups, first at Kayak as a Managing Director for Central and Eastern Europe, and then as a General Manager for Airbnb. Earlier in his career, over the space of a decade, Verbitsky was a practice lead for Deloitte, a manager at BearingPoint, and a management consultant for Accenture.

Jeremy Sanders

The pair of new recruits join Jeremy Sanders in Oyo’s international expansion efforts, who was named as country head of the UK late last year with a view to launching in ten cities beyond London in the next two years, including Manchester, Birmingham, Glasgow and Edinburgh. Sanders co-founded restaurant chain Coco di Mama, which he ran for over six and a half years, following a five and a half year stint as consultant with Bain & Company in London.

A background in management consulting is of course not that uncommon in the entrepreneurial world – indeed, one study in the Middle East found that more than a third of the region’s top tech start-up founders came via the management consulting sector – but for Oyo there may be an additional factor in seeking out consulting experience among its senior leadership; Oyo’s Chief Operating Officer Abhinav Sinha is an alumnus of Boston Consulting Group, where he was a Principal for nearly five years in the US before joining the hospitality start-up.

With operations already underway in Nepal, Malaysia, and China – where Oyo has stated it will invest the bulk of its recent financing at around $600 million – and its most recent country launch in Indonesia, Oyo’s next stop is the Philippines, with further Southeast Asian launches in the pipeline this year including Singapore, Vietnam and Thailand. The company has also been running a pilot in Japan, looking to officially launch in the next three or so months.