It was a classic humid June night in downtown Cleveland, but the scene was anything but typical. The clock had struck midnight at about the same time that streams of mostly ecstatic Cavs fans began pouring out of “The Q” (Quicken Loans Arena). Native son Lebron James had just put the finishing touches on a brilliant performance that had propelled Cleveland to a 2–1 game lead in the NBA Finals.
The many indoor/outdoor bars that surround the arena quickly swelled beyond capacity while seemingly endless waves of Millennials adorned in Cleveland Cavaliers gear just kept coming. There was singing and dancing in the streets – much of it influenced by approachable inebriation. For a city beaten down by decades of hard times, the guarded optimism hanging in the air was as blissful as it was distinctly foreign.
For those not inclined to partake in what had the potential to slip into marked public lunacy but who were also not quite ready to call it a night, there was only one other obvious available option: the Horseshoe Casino, located just across the street from the arena.
On that unusual night, one group of attendees making their way from the arena to the casino particularly stuck out. They appeared to be in their early 30s and only a few of them were wearing NBA apparel . . . of the visiting Golden State Warriors. Amidst a backdrop whereby the crowd and the increasingly rowdy atmosphere was markedly Midwest-American-White, the other distinguishing characteristic of the group was even more distinctive: they were ethnically Chinese.
The casino floor, like the surrounding streets outside, was packed with a mix of curiosity seekers coming from the arena, casual gamblers and traditional slot players who may have forgotten about the big game that night and were now dealing with the consequences.
Perhaps surprisingly to some, the casino has baccarat tables. With that in mind, however, it was less surprising that this group of Chinese guests had found them. As they saddled up to positions 1-2-3-5-6, one of them reached into her purse, pulled out a stack of money and pushed it toward the dealer to exchange for playing chips.
In baccarat, there is usually no position 4 because that number is homophonous with “death” in Chinese; the nuances of superstition and luck within the mindset of the Asian gambler are seemingly endless.
Several octaves below the ambient crowd noise, slot machine clamor and John Mellencamp’s “Hurts So Good,” the young Chinese woman tapped her cash and rather firmly said to the dealer “liǎng wàn” ($20,000). In short order, a casino host, also of Asian descent, appeared and engaged the group in some light Chinese banter. It was just another Tuesday night in Cleveland, Ohio.
For some regional casinos, a few observed baccarat tables and a handful of Chinese speaking staff may currently suffice. But for businesses in geographic zones with many Asian residents and those in destination markets, this type of customer – specifically the Chinese Millennial leisure traveler – will soon become increasingly important.
Chinese outbound tourists are already the world’s most numerous and most high-volume spenders
Chinese outbound tourists are already the world’s most numerous and high-volume spenders. In 2014 a record 109 million Chinese outbound tourists spent $164 billion. By 2019, these numbers are expected to balloon to 174 million people spending an incredible $264 billion annually.1 Nearly all of this growth in foreign travel has come over the past 10 years; in 2000, there were only 10 million Chinese outbound tourists.
“China-mania spread globally in the past few years, akin to when the Japanese started travelling some 30 years ago, when the world went into frenzy then, pandering to Japanese customers’ needs. In our view, this is going to be bigger and will last longer given China’s population of 1.3 billion vs. Japan’s population of 127 million.”.
~Bank of America Merrill Lynch, Capital Market Outlook March 2015
The driving force behind this new wave of leisure travelers will be Chinese Millennials aged 25–34, who are much different from both their parents and their peer groups in Western nations. This group of Chinese comprise more than 200 million people, or about 17 percent of China’s 1.3 billion total population.
Unlike their American counterparts, still mired by the aftereffects of the Great Recession, Chinese Millennials have seen their incomes rise nearly 35 percent over the past three years
With China’s economy being among the largest in the world, the incomes of many are now high enough to travel abroad. Unlike their American counterparts, still mired by the aftereffects of the Great Recession, Chinese Millennials have seen their incomes rise nearly 35 percent over the past three years.2 In just the past year, the number of Chinese outbound travelers has increased by an astonishing 20 percent. This has not gone unnoticed by hoteliers with nearly 60 percent of U.S. and 80 percent of AsiaPac businesses noting discernible increases.3
Ninety percent of Chinese Millennials surveyed recently by Hotels.com’s Chinese International Travel Monitor stated that “leisure” was their main reason for international travel.
Gambling overseas is also very popular with Chinese tourists. In the last five years, the number of Chinese travelling to Las Vegas has jumped by 80 percent, according to the Wall Street Journal. In a recent survey of mainland Chinese Millennials, Las Vegas was cited as the most popular leisure destination.4
Two of the gaming industry’s leading markets, Macau and Las Vegas, are facing a similar challenge whereby demographic trends are disrupting traditional business models.
In the case of Macau – which has seen historic gambling revenue lows this year – there is a shift toward diversification, largely via government mandate,5 away from near total reliance on the VIP market and toward broadening amenities that better appeal to China’s growing middle class, which McKinsey China forecasts will constitute 630 million people by 2022.
In Las Vegas, an aging population of slot players is being replaced by younger consumers, including Chinese Millennials, who by-in-large show a marked lack of interest in traditional casino games compared to generations past.
Shopping is perhaps the most popular activity for Chinese tourists. China’s import and consumption tax rates have resulted in luxury goods often costing several times more in Mainland China compared to western nations. There may also be perceived prestige attached to purchasing a luxury product in its home country (such as Switzerland, Italy or France). Much of the rabid consumption of luxury items by Chinese tourists is status driven. Global Blue, a retail-tourism company, found that 82 percent of Chinese travelers felt that shopping was a “crucial” part of their travel plans.
In England, Chinese tourists spent nearly $3,000 per person per trip, three times the market average. For many Chinese, shopping is prioritized above other travel expenditures such as accommodations. According to an Economist article on the subject, “Chinese have no problem buying Prada by day, but sleeping in two-star hotels by night.”6
For younger Chinese leisure travelers, there is less alignment with this type of sentiment.7 Chinese Millennials are much more likely to consider (and pay for) lodging that is less “just a place to sleep” and more an integral part of their leisure experience. This presents incentives for forward-thinking hoteliers to target them with an experiential rationale to pay a premium for something their parents might consider ancillary.
Another popular activity among Chinese Millennial leisure travelers is visiting important landmarks. However, the younger generations are shunning group tours whereby one might get off a bus to take a quick picture and then immediately get back on to go to the next stop. Instead, they favor deeper cultural experiences.
Chinese Millennials are the first generation to be born into the country’s one-child policy. As a result, they have more spending power than prior generations. Although they put off marriage a couple of years later into life than their parents did, on average, Chinese Millennials are still twice as likely to be married than their U.S. counterparts.8
Marriage within this demographic sometimes includes planning for a unique and romantic honeymoon experience abroad, often financed by their parents. The city of Seattle appeals to many, in part because of the popularity of “Sleepless in Seattle” and the Chinese version “Beijing Meets Seattle,” which grossed nearly $100 million in 2013 and is credited in part with spiking a Chinese real estate boom in the Pacific Northwest municipality.9
A recent survey among Chinese Millennials found that 65 percent travel with family and/or their significant others versus travelling with friends.10 This behavior obviously influences the types of experiences and activities they seek and may partially explain why nightclubs and other places that encourage “social collisions” are generally of less interest among this group of consumers; this trend directly contrasts to what American Millennials typically seek in a leisure environment.11
nightclubs and other places that encourage “social collisions” are generally of less interest among this group of consumers; this trend directly contrasts to what American Millennials typically seek in a leisure environment
As is the case with their U.S. counterparts, younger Chinese consumers rely heavily on mobile technology, social media and peer reviews when making purchase decisions. According to a recent Hotels.com survey, nearly half of Chinese Millennials rely on word-of-mouth and consumer reviews online while 80 percent used a desktop, laptop or mobile device to plan and book their travel in 2014 (compared to 53 percent the year before). It is not surprising, then, that they rank “free WiFi” as by far their most desirable amenity when traveling, just as younger Americans do.
Unlike American Millennials, who have transformed places like Las Vegas into a nightclub and dayclub mecca, younger Chinese consumers are generally disinterested in “clubbing” and the traditional, alcohol-fueled, bar scene. They also prefer indoor pools to outdoor, partially to avoid sunlight and the resulting darker skin that invites social stigmas still common in emerging countries.
The U.S. is one of the most visited nations visited by Chinese Millennial tourists outside of Asia, along with France and Australia. Within these destinations, this block of consumers is increasingly looking for something special and personalized which they can share with friends via their social networks. When studying the Chinese Millennial, one finds this notion of prioritizing the individual self as a recurring theme, one which hints at ways to reach and retain them as customers.
With free WiFi as a baseline expectation, forward thinking leisure companies can engage Chinese Millennials in ways that tap into their desire for something custom made. One such strategy would involve leveraging the power of dominant social networks like WeChat to communicate with them in interesting and sharable ways.12
It is vitally important for businesses within hospitality, retail, restaurant and entertainment verticals to understand the behaviors and drivers of Chinese Millennials, a different set of consumers poised to transform these industries for years to come.
Dissecting the Social Milieu of China’s Balinghou Generation
Chinese born in the 1980s – also referred to within China as the “Balinghou” generation – are distinctively different. Since the death of Mao Zedong, rapid change has occurred in China, paving the way for new prospects and challenges that are far different from what their parents experienced at the same age. Radical disparities exist between Chinese youth and older generations.
“The generation gap is smaller for Western Millennials, who were born into a world only somewhat different from the world their parents grew up in, than for Chinese Millennials, who were born into a world that is vastly different from the world their parents grew up in. China experienced a massive and abrupt change of direction in the 1980s, shifting from a planned economy, to a market economy, from high fertility to very low fertility, from autarky to globalization and from reserving secondary and tertiary education for a small minority to expanding adult education programs that made them available to most who want it.”
~Vanessa Fong, Professor of Anthropology at Amherst College
Simultaneous with China’s swift economic growth has been a global explosion of new technology, bringing unique methods of communication and amplified exposure to other cultures. Increased prosperity, freedom and exposure to new ideas have also led Chinese Millennials to socialize in new ways.
WeChat (called “Weixin” and literally translated as “micro-message”) is one of China’s most popular social networks. It’s part WhatsApp and part Facebook; since its debut in 2011, WeChat now boasts 450 million users in China. The mobile app’s core users are urban youths, many of whom default to the platform over exchanging phone numbers as a preferred way to keep in touch with their friends.
Similar to Twitter in that feeds are created to allow users to receive information as it is pushed out by chosen channels, WeChat is primarily a text and audio service between private users or small privately-invited groups of up to 100 people. Users can extend their reach by posting “moments,” streams of images, text messages and links available only within their network of contacts, in a way that is more streamlined than Facebook’s “Wall.”
WeChat has made itself a potent tool for marketers looking to tap into tightly knit groups such as Chinese Millennial travelers. Marketing, sales of physical products and/or booking of services are all available on the platform to companies registered in China. As Chinese consumers tend to be even more influenced by their peers than Westerners, the size, scope and functionality of the app presents a potent mix for businesses to contemplate tapping into. WeChat for Business (in China) allows B2C payments in areas for consumables such as plane tickets, hotel reservations and taxi fares. Payments are made by scanning an offline or QR code or via a payment processing platform contained within the app that links to the user’s bank account.
WeChat users average more than 40 minutes per day using the app with more than 55 percent indicating that they open the app at least 10 times per day. The Chinese-language version of WeChat has many additional features that make it much deeper than just a messaging platform. It is also has mobile news, blogging, online storefront, mobile wallet, “people nearby” and even job hunting uses. University of Pennsylvania researcher Jiaqi Wu argues that the uniqueness of the app and its user base (Chinese Millennials) transcends beyond the virtual and into the physical world of networking, relationships and social interaction.13
In many Western countries, young people socialize at cafés, bars or clubs. Although these types of venues can also be found throughout China, Chinese Millennials normally favor different types of social environments. Perhaps no more universal example exists, in China and throughout Southeast Asia, than karaoke (or “KTV” short for Karaoke Television) which is wildly popular across generations, including Millennials.
In a nation such as China, where consumption of alcohol is less prevalent than it is in the West, karaoke provides a livelier alternative to other types of non-alcohol related activities such as going to the movies. Guests pay hourly rates for private rooms with padded walls and sort through catalogues with thousands of songs to choose from. Venues range from small and cheap to vast and ostentatious.
It is a serious affair for Chinese participants, unlike in the U.S. where bad singing is part of the fun. Karaoke also represents one of the best ways to peel back the veneers of one’s exterior-facing persona to reveal what the true person underneath is like. For this reason perhaps, karaoke remains an important deal-making tool among business people throughout Southeast Asia, where relationship development is typically the most critical difference between success and failure. In places like China, getting to know the “real you” is a very important facet of personal and professional development.
In places like China, getting to know the “real you” is a very important facet of personal and professional development
Opportunities exist for Western businesses that may currently, or in the near future, seek to attract Chinese Millennials by integrating both karaoke itself or, perhaps more importantly, by extracting the compelling and applicable fragments of a karaoke experience into other business units.
A Westerner travelling in China may be reluctant to embarrass himself in public and/or feel overwhelmed by the vast cultural differences and thus might change his tune (pun intended) to start belting out verses when a Bon Jovi song is played. Similarly, the opportunity exists for Western businesses to spark a sense of nostalgia-for-home by incorporating singers such as Andy Lau into the mix, be it within a karaoke environment or beyond.
Teahouses have traditionally been another very popular social activity in China and are often associated with relaxation, entertainment, interaction and a forum for sharing thoughts with friends and colleagues.
Consumption of tea in China dates back nearly 5,000 years. According to legend, it was accidentally discovered by Chinese Emperor Shen Nong one afternoon when a leaf from a nearby tea tree fell into his pot of boiling water. Tea itself is a very sophisticated enterprise in China, with many regional variants and a long history of refinement over the eons. In addition to green tea, popular selections include oolong, pu’er, white, black and flower teas.
In recent years, Chinese Millennials have shown a particular affinity for coffee. Cafes such as Starbucks and Coffee Bean & Tea (“Xiangbinfei” in China) have become popular places for young people, influenced by Western culture, to hang out. The architecture in these cafes often combines historic and modern styles in ways that appeal to a demographic with one foot in each era.
For businesses attempting to court Chinese Millennials, there may be opportunities to convert static physical environments, such as a bar or lounge in the early afternoon, into transformable modules that can be converted for different types of consumers throughout the day. Wildly popular among Chinese Millennials, hot pot chain Hai Di Lao competes in a very difficult space. The company describes its physical environment as an ideal place for social gatherings for customers with some extra time to spare.
A “hot pot” style of eating involves dipping meats and vegetables into simmering broth. The cooking concept is simple and easy for competitors to replicate. Hai Di Lao has become one of China’s most successful hot pot brands largely by focusing on experiential components of the dining (and pre-dining) environment. The restaurant chain has a strong reputation for customer and employee loyalty, which are both atypical for Chinese hospitality businesses.
Customers wait 2–3 hours on average for a table at Hai Di Lao, during which they patiently enjoy free WiFi and indulge in some other interesting free perks such as shoe shines, unlimited snacks, children’s toys, mobile phone repair and even manicures and hand massages. Many of the restaurants also have tables set up so that guests waiting for their table can play card games.
Once seated, guests can order from iPads. There is entertainment as well in the form of the restaurant’s famous “Noodle Dance” put on by servers.
Wait lists for tables on weekends average 50 to 75 names in peak traffic times. Like many customers, Zhao Xiaoyi, a flight attendant in Beijing, is willing to wait for a full hour, playing chess and snacking on cherry tomatoes and animal crackers. “It's absolutely worth the wait,” Ms. Zhao said.14
The experiential element of Hai Di Lao undoubtedly plays an important role to the chain’s success. Customer satisfaction actually increases while patrons are waiting – sometimes hours – for their tables because the restaurant has so many entertainment and leisure options available. This type of creative queuing system offers opportunity to other leisure and hospitality businesses to piggy back onto the experience, beginning with the wait for the experience to begin.
Customer satisfaction actually increases while patrons are waiting – sometimes hours – for their tables because the restaurant has so many entertainment and leisure options available
American Millennial views on money and happiness overwhelmingly lean toward spending money on experiences over material things. Chinese Millennials seem to want both.
Younger Chinese are focused on experience and individualism
Over the next several years, Chinese Millennials will be the demographic force behind revenue growth for businesses in leisure verticals.
The demands of these consumers are complex and steeped in juxtaposition with their parents, thousands of years of history and the outside world they are so eager to explore. For global corporations doing business in China, there is added opportunity (and risk) in attempting to woo Chinese Millennials.
Two years ago the Volkswagen Group made interesting strides in tapping into the unique attributes of younger Chinese consumers as part of a print and television ad campaign. China is Volkswagen’s most important sales region; the company sold nearly 3.3 million cars there in 2013 alone, more than double VW’s sales in Germany. Porsche and Bentley, both owned by Volkswagen, also point to China as their top sales market.
Volkswagen’s “Fun. Don’t leave it too late” Beetle campaign of 2013 was squarely aimed at Chinese Millennials. The advertisement is set against a backdrop of elders futilely attempting to recapture their youth in various ways (raving, skateboarding, spray painting the side of a building, etc.) despite these adventures being clearly beyond their physical abilities.
The unconventional approach presents Volkswagen’s globally-established, laid-back, hipster brand messaging to a younger Chinese audience in a way that reinforces an iconic automobile that is also innovative, modern and enjoyable to drive. The goal is to connect younger Chinese consumers who want to have fun now, before opportunities to let loose pass them by.15
Attracting Chinese Millennials to a physical product, or a physical space, requires an acknowledgement that what has worked in the past will likely not work with them.
It would be a significant miscalculation, for example, to assume that they will respond to what (and how) their parents consume. Chinese Millennials definitely want material things. But they also want to express themselves in ways they are comfortable with, which appeal to their desire to really know who they are hanging out with in their quest for deep and meaningful relationships with other people.
Chinese Millennials definitely want material things. But they also want to express themselves in ways they are comfortable with
A consumer insights study geared toward the specific goals of a development project seeking to attract Chinese Millennials would be a worthwhile investment for any business looking to tap into this enormous potential revenue stream.
For leisure and interconnected businesses this means developing beyond a singular, localized element within a designated environment. The larger experience – driven by a desire for something different, unique and genuine – should also be contemplated in ways that reflect and even encourage the blurring of cultural lines to that place where discovery of something “new” is likely always the experience for someone in the room.