Tour operators feel chill from austerity drive

An austerity campaign launched in China has produced a chilling effect on the tourism industry, with travel agencies having to realign their strategies to heat up their profits.

Group tours are among the hardest hit business, with many travel agencies reporting a sales decline of up to 50 percent since the beginning of the year.

Lu Bo, a manager of a travel agency based in East China's Jiangxi province, said his company's group tour business has halved from a year ago as fewer travellers are signing up for packages.

Industry insiders said agencies used to rely on group tour packages tailored for government officials for nearly 80 percent of their profits.

However, not all such tours were paid with officials' own money.

The public were angered over reports of officials using business trips and conferences as a disguise to go on personal vacations, splurging taxpayers' money on extravagance.

He Luhua, former head of the Bureau of Justice at Longgang district, Shenzhen city, in South China's Guangdong province, was removed from his post for spending 140,000 yuan (22,820 U.S.dollars) on luxury hotels and travel during what was supposed to be a five-day inspection tour.

The 24 people involved in the case, including He, were asked to return the money they spent.

In December, the ruling Communist Party of China rolled out a series of measures to improve work style and efficiency, such as controls on the number of people on inspection tours and banning lavish receptions.

Travel agencies are not the only ones to have suffered from the government's crackdown. High-end catering and luxury goods have witnessed plunging revenues after the campaign kicked in.

In response, many restaurants started to offer half servings of food, allowed diners to bring their own drinks and canceled charges for individual dining rooms.

A fancy restaurant in Jinan, capital of East China's Shandong province, recently replaced shark fin soup and abalones with 8 yuan specials on its menu to attract less affluent diners.

Chen Guozhong, head of the Tourism Planning and Design Institute of Shandong province, said similar changes must take place in the tourism industry with opportunities to make money being provided by the growing number of middle-class Chinese people.

Gone are the days when managers working from office buildings strike group tour deals with large clients over the phone, said Lu Bo, general manager of a travel agency based in east China's Jiangsu province.

In a bid to attract long-ignored customers, some agencies are looking to grow their presence in communities and in supermarkets while other tour operators are providing beauty and health programs, rather than just trips to scenic spots, as part of holiday packages.

During the three-day May Day holiday, Shandong province welcomed 23.09 million tourists, up 13.3 percent from a year ago. Tourism revenues shot up 13.1 percent to 16.66 billion yuan.

More Chinese people are traveling around the country and abroad, less as groups arranged by tour operators but more on their own.

More than 100,000 tourists flocked to Wuyuan, a popular destination in East China's Jiangxi province, during the May Day holiday, up 20 percent from a year ago. Yet few were traveling using agencies.

The rise of individual travellers heralds the coming-of-age of China's tourism industry, Chen Guozhong, head of the Tourism Planning and Design Institute of Shangdong province, said.

Analysts thus advise tour operators to redesign their products to better meet the needs of savvy travellers.

"This might be a cold winter for the whole industry, but I'd like to see it more as a game-changer", said Ma Li, vice president of Shandong Jiahua Travel Agency.

According to Ma, the company has reinvented its marketing strategies to target various groups, such as senior couples and newly-weds. Revenues have seen single digit growth so far this year despite diminished interest in traditional tour packages.