France Sees Great Potential in the Chinese Tourism Industry

The statistics this year for French tourism are a bit fuzzy. Minister of Tourism Sylvia Pinel remains cautious with the numbers while the results from Protourisme, the reference point for tourism studies, look gloomy [fr].

But in China, predictions for the tourism industry are crystal clear: the market is promising. Therefore, tour operators, especially French ones, have decided to advance development in this area, beginning with vacation resorts group Club Med.

China is a highly sought-after market for tourism, and for good reason. Tourism is a relatively new concept in the country [fr]. It began in the late 1990s, when Chinese employees were given two days of rest per week, and then nine holidays a year. As a result, tourism shot up dramatically. Now, Chinese spending abroad has grown 40 percent from 2011 to 2012 [fr].

China a Huge Market for Tour Operators

We tend to think immediately of Chinese tourism abroad. The figures are in fact significant. According to the Business Insider, the number of overseas trips went from 10 million in 2000 to 83 million in 2012. But before setting off for foreign lands, the Chinese are interested in their own country first. Chinese domestic tourism far exceeds the international sort. A study shows [fr] that a total of 300 million Chinese tourists have travelled within China, compared to 15 million international tourists, generating 110 billion US dollars, against 30 billion US dollars for domestic tourism.

Touristes chinois par Marc Ben Fatma - license CC-BY-NC-2.0

Chinese tourists (Marc Ben Fatma, license CC-BY-NC-2.0)

The trend represents a huge expansion opportunity for tour operators, many of whom have set up shop on the Chinese market. Havas Voyages Vacances, Mandarin Voyages, and Nouvelles Frontières are among the hundred or so agencies that have come to offer tours [fr] in mainland China.

Club Med Eyes China

Club Med drew attention recently when it announced its ambitious plans for China [fr].  The company intends to gain market share in the country, particularly since the European market, and more specifically the French market, is in a steep downswing. Its goal is to win over some 200,000 customers by the end of 2015, with five villages and resorts opening in 2013. China will then become Club Med’s second-biggest market [fr]:

Les Chinois sont aujourd'hui 80.000 à prendre le chemin des villages. Et en 2015, avec 200.000 GM (gentils membres), cinq villages locaux et des hôtels-resorts “By Club Med” créés pour l'occasion, la Chine deviendra le 2e marché du Club. Plus globalement, c'est en Asie que le Club pourra le mieux poursuivre sa stratégie de montée en gamme, grâce à l'enrichissement des classes moyennes.

There are 80,000 Chinese tourists who will go to Club Med resorts this year. In 2015, with 200,000 members, five local villages and resorts built for the occasion, China will become the second-largest market for the company. In fact, from a global perspective, it's in Asia that Club Med will be able to pursue its high-end marketing strategies thanks to the growing wealth of the Asian middle class.

The investment required to build these deluxe villages, especially the one planned for the tropical islands of Hainan province in southern China [fr], where the wealthiest Chinese investors can be found, promises to be colossal. The two main shareholders, AXA PE and Fosun, launched a friendly takeover bid for the Club to obtain 50.1 percent of the capital and voting rights. The move would lift short-term shareholder constraints, immediately free up some liquid assets, and allow them to accelerate their international strategy at will.

In an interview with Le Figaro, Fosun chairman Guo Guangchang made no secret of the takeover bid’s purpose at this turning point in Club Med’s development:

Cela fait trois ans que Fosun est actionnaire du Club Med. L’offre, que nous présentons avec Axa PE et le management, a deux objectifs. Le premier est de donner au Club un actionnariat stable pendant une période minimum de cinq ans. Le second est de l’accompagner dans son développement sur le marché asiatique, et tout particulièrement en Chine.

Fosun has been a shareholder in Club Med for three years. The bid we’re presenting with Axa PE and management has two aims. The first is to give the Club a stable shareholder base for a minimum period of five years. The second is to support its development in the Asian market, particularly in China.

For now, the Court of Appeals is holding up the bid until it rules on appeals filed by minority shareholders. The ruling should come by the end of September. These minority appeals dispute the validation of the takeover bid by the Financial Market Authority (French initials, AMF). So far, the grounds of the dispute remain unclear.

]]>