Healthy Profit Potential in China’s Luxury Product

Growing demand for luxury travel to China, together with new products, can drive more revenue and better profitability for travel agents – as well as the opportunity to offer high-value experiences to clients.
 
“Obviously, the revenue is much higher for travel agents booking luxury tours to China than selling a domestic or nearby destination, because China is a big trip [that yields] a high dollar-amount commission-wise,” said Pacific Delight president Larry Kwan.

There has been “tremendous growth” in market for luxury travel to China, Kwan added.  “The bottom line:  It is more profitable for agents to sell China programs.”

New luxury China product
Other operators are responding to the growth of demand for luxury China vacations. For example, Pacific Holidays this year introduced a line of luxury China programs – in anticipation that clients “will start spending again,” according to Marta Visu, vice president of marketing and product development.

Pacific Delight expanded its luxury line of China tours by introducing a Silver Experience program to China at lower price points. The programs are designed to complement its Gold Experiences, which it “kicked up a notch or two,” Kwan said.

Driving the trend
Expanded luxury infrastructure in the People’s Republic – there are now five-star chains in all major cities and an increasing number in secondary cities – as well as continuing favorable exchange rates for U.S. travelers are key factors driving growth, Kwan said.

The popularity of experiential travel is another factor.  Many clients see China as a once in a lifetime trip, and they are willing to pay more for once in a lifetime experiences, said Wendy Wu, founder and CEO of Wendy Wu Tours.

“Luxury doesn’t only mean five-star and beyond accommodations, but also one of a kind experiences – like seeing the Great Wall from a hot air balloon – and in-depth cultural experiences, such as a tour of Xian conducted by an expert on archeology,” she said.

Tip: highlight value for money
Both Wu and Visu said luxury clients are still looking for value for their money. “They don’t want to feel they are being ripped off,” said Wu.

Travel agents should point out that clients don’t have to spend a lot more money to get a customized tour with a private car, especially for small groups, which includes families, Visu said. “Groups trade up when they customize. It’s not a lot more money for a great way to see China.”

Wu added that a small group (maximum 28 people) can pay just $800 more than the brochure price for a 10-day trip and receive an entirely tailor-made experience. “It’s a great value, especially for families,” she said.

Kwan noted that because of favorable exchange rates, China offers lots of value for clients’ money compared to other foreign destinations.

Where to prospect for clients
“The demographics of our marketplace are basically 50 and up – professional people who are quite established in their careers,” said Kwan. “A lot of them are retired and have the income to enjoy their retirement.”

Wu suggested that agents look to past clients who have sailed on luxury cruises or booked high-end tours and hotels. Other prime prospects include clients who are looking for unique experiences and/or enhanced VIP amenities. Luxury China also counts as a great bucket list trip.

American clients are willing to spend for a once in a lifetime experience, said Wu, who contrasted that with price-driven Australian and U.K. markets, where her company has sold China for the past decade.

Luxury on Yangtze cruises
Responding to the luxury trend, Victoria Cruises is revamping its fleet of Yangtze River cruise ships to add an Executive Deck concierge service that is designed to appeal to upscale Western travelers, Larry Greenman, manager of public relations and customer service told Travel Market Report.

Victoria Cruises’ Yangtze River itineraries are usually included as part of general tours of China. Greenman said the line’s introduction of the Executive Deck, which has enhanced VIP amenities, dovetails with what its tour operator partners are doing to expand their luxury lineups.