Film festival: A low-budget Chinese movie helped open the visitor floodgates

Some in the industry hail it as the best investment the Tourism Authority of Thailand (TAT) has ever made. TAT contributed BT2m ($65,000) to help make the Chinese film Lost in Thailand, which was shot on location in the north-western Thai city of Chiang Mai, and went on to become the highest-grossing mainland film ever. It was the first local production to break the 1bn yuan ($163m) mark at the box office. More significantly for Thailand, the comedy has been credited with boosting the number of Chinese visitors to the country to epic proportions: the figure for 2013 was more than 4.7m of the country’s 26.7m total international visitors.

Boost

Chiang Mai had previously been described as one of the world’s most over-hoteled cities. However, according to Sarawut Saetiao, president of the Chiang Mai Tourism Business Association, after the film became popular in China occupancy rates in the city averaged 80-90% for its 40,000-plus rooms. Thailand became the most popular foreign destination for Chinese during the 2013 May Day holiday, with the number higher than those heading for Hong Kong for the first time. Chinese low-cost carrier Spring Airlines increased its number of weekly flights to Thailand from 10 to 17 to serve the extra demand.

Attracting many millions of Chinese tourists has not been without difficulties. The practice by some travel agents of advertising ultra-cheap package holidays to Thailand with profits assured by unannounced compulsory excursions on arrival brought complaints. In a repeat of what was a frequent occurrence in Western Europe when affordable foreign holidays were introduced on a wide scale 50 years ago, tour groups were herded into restaurants or shops where the agencies were guaranteed commission of up to 40% of the overpriced cost of meals or goods.

New Law

In response to such treatment of some of its citizens, a law was passed in China that forbade the sale of these “zero-dollar” tours. It went into effect on October 1, 2013. Under Article 35 of the law, agencies are prohibited from “luring tourists with unreasonably low prices, or getting illegitimate gains such as rebates by arranging shopping or providing tourism services that require additional payments”. Some tour operators had been using shop owners’ buses to direct visitors to their premises.

Until the passing of that law, there had been no specific Chinese law governing tourism. With the UN World Tourism Organisation (UNWTO) estimating that the total number of Chinese travelling abroad will reach 100m a year by 2015, the new restrictions will also cover similar practices in other countries.

China is already the world’s largest outbound tourism market, according to the UNWTO. Its citizens took more than 83m overseas trips in 2012, with spending outside the country hitting $102bn.

In any case, the travelling habits of Chinese tourists are changing, making them less vulnerable to dubious deals on excursions. A survey by a Chinese tourism agency found that 70% now make their own travel and accommodation arrangements, with fewer than 30% still buying package tours. Given the relatively short flights involved, some were arriving without a hotel booking and shopping around for the cheapest rate on arrival, although this practice has been less common since the passage of the new law.

Seesaw

The meteoric rise in the numbers of Chinese visitors wobbled toward the end of 2013 after the law was passed. The sharp fall in the growth rate coincided with the onset of political demonstrations in parts of Bangkok, yet the new law was a bigger factor, according to the Association of Thai Travel Agents. Local press reports quoted its president, Sisdivachr Cheewarattanaporn, as saying that the new regulations had caused a 40% drop in bookings in October 2013. “The decline in Chinese travel is not because of political unrest, it’s the new law,” he said.

To provide a built-in solution to some of the issues, the two countries intend to use a new bilateral committee to address tourism-related problems, as well as draw up strategies to promote travel. Thailand will provide Beijing with a list of “trustworthy” government-certified hotels and restaurants, as well as a list of restaurants and hotels that have been blacklisted by the government for causing problems.

Another difficulty is the shortage of bilingual tour guides in Thailand. In light of the surge of Chinese travellers, the number of tour guides trained to cater to foreign travellers is inadequate, according to the minister of tourism and sports, Somsak Pureesrisak. Only 2000 certified guides are available for the 350,000 Chinese who visit Thailand every month on average. “Mandarin could soon be the second-most-important foreign language in the country after English, and may not be far away from the most important,” Bert van Walbeek, managing director of The Winning Edge hospitality consultancy, told OBG.

VISA Waiver

Somsak also spoke at the 15th China International Travel Mart in Kunming about the likelihood of a waiver on tourist visas between China and Thailand. “The government is afraid that if a visa waiver for the Chinese is done without adequate preparation, it could create problems for Chinese travellers, and they are already the biggest source of foreign visitors,” he was reported as saying. The problems he was referring to include airport handling capacity, the number of hotel rooms and safety considerations. While no explanation of this forecast has been offered, some in the industry have suggested that immediate introduction of visas on arrival for the Chinese could, on its own, increase their number to 6m a year. Even without a waiver, getting a visa would be made easier by plans for an internet-based issuing system.

Going Upmarket

While popular wisdom brackets Chinese visitors as low-end, Suraphon Svetasreni, the governor of TAT until December 2013, masterminded a marketing strategy to push tourism up the value chain by boosting revenues as much as visitor volumes. TAT wants to see the proportion of tourists in the $20,000-60,000 income range increase from 30% to 40% in 2014, and to help achieve this it is looking towards boosting the numbers being attracted from Turkey, Eastern Europe, Africa and the Gulf, as well as Western Europe. Charles Blocker, the CEO of Invision Capital, told OBG, “Chinese tourists in Bangkok are mainly three-star hotel customers at the moment, but there is an upper middle class in China that is growing every week.”

TAT is planning a fifth office in China in Guangzhou to cover the south of the country. The other four are in Beijing, Kunming, Shanghai and Chengdu. Guangzhou has been targeted because it is closer to Thailand than most of the rest of China and has higher-than-average incomes, with a per capita revenue on a par with those of Beijing and Shanghai.

Occupancy

Whatever the individual income level, the collective importance of the Chinese is demonstrable. Pornthip Hirunkate, vice-president of the Tourism Council of Thailand, told OBG, “Mainly thanks to a rise in the number of Chinese tourists, occupancy in Bangkok hotels year-round has increased from 40%-plus to 60-65%. The Chinese go mostly to three destinations – Bangkok, Phuket, Pattaya – and the inbound operators for Chinese tourists are looking to spread them more round the country.”

Van Walbeek told OBG, “There is perpetual talk of broadening the appeal beyond three-star hotels, but with a government saying that it wants 30m tourists by 2015, there is no incentive to change a winning formula.” There is also growing infrastructure to import them. “Around 60 airports are under construction in China and they will be served mainly by low-cost carriers,” said Van Walbeek.

Blocker sees an opportunity to attract Chinese of various socio-economic levels. “Everyone will have China in their growth model – luxury, four-star and mid-scale,” he told OBG. TAT predicts that the number of Chinese visitors will reach 5.4m in 2014. One thing clearly not lost on the authorities is an awareness of how enduring the Chinese market could be.