Interview with Roy Graff, managing director, ChinaContact

China Special: By EyeforTravel.com Correspondent

ChinaContact, set up last year, specialises in consultation, brokering deals, representation and practical business services for FIT, corporate and incentive travel.

Sharing more information about company’s expertise, Roy Graff, managing director, ChinaContact, says, “Much of the work is about educating and highlighting the challenges of doing business in China, making companies realise what it will take to succeed in this market. We champion a long term strategy in an industry ruled by short term gains, so it certainly is a challenge.”

Graff feels conglomerates that enter China still do not have a level playing field even though WTO rules require China to allow this gradually.

“If the Chinese have not heard of these companies before, then their status as multinational conglomerates will not make a difference to their chances in China. On the whole I would say that their entrance is positive as it provides the Chinese consumers with more choice, more information and pressure to provide better standards of service,” he says.

“Online travel companies cannot operate in China as per their normal business model. Therefore, traditional wholesalers who are able to offer online products to their agents have an advantage as far as online bookings go. In order to be profitable from direct sales the business model needs to adapt and become flexible, offering call centre and offline payment solutions.”

Graff, who was recently in China for the EyeforTravel’s Travel Distribution China conference spoke to Ritesh Gupta about key regulatory and industry issues. Excerpts:

What major trends have you witnessed in Chinese travel industry? How are consumers going about online travel?

The Chinese market is fragmented and offers many niche markets that companies can exploit. A segment of that market uses internet to research their travel plans and a smaller number book online - mainly
for business travel. The independent travel market which is more inclined to book online, is still reliant on travel agents for booking and payment in most cases. What has changed now is that consumers expect the agents to book online and provide detailed information from the supplier on the itinerary, hotel facilities and all travel arrangements. They expect a fast reply as they know this is possible online. Those travel agents that cannot match these expectations will lose out.

How do you think online travel agencies have formed a connection with consumers?

As in other areas of business in China, personal trust and personal relationships are crucial. Building that trust through a computer is much harder and requires a proven track record, support from the media
and investment in loyalty. Successful local `online’ companies still provide support over the phone and a local cash collection point. Loyalty programmes are frequently used and cooperation with banks and
associations helps to build further trust.

What do you think is critical for global companies to enter in China? What regulatory hurdles still bother them?

It is critical to accept that your traditional business model will need to adapt to local conditions. Often this means the flexibility to change it for different regions within China. It is critical to have humility in understanding that your strong brand identity may mean nothing to Chinese consumers. And it is very important to spend time researching and be careful in choosing the right people to work for you. China still protects local industry - as a foreign company you can still not operate freely if you want to sell outbound travel to Chinese.

The concept of bilateralism is very strong and companies must demonstrate the strength in inbound travel before they can apply for an outbound travel licence. This is also true for local companies.

Can you provide some insight into Chinese outbound tourism market? What are striking feature or trends of this segment?

China outbound tourism is much hyped and indeed stands to change the way we think about international tourism  - but this is still a long way off. At present the vast majority of Chinese that leave China end
up in HKG, Macau or the bordering countries to the north and south. Lack of accurate statistics means we cannot know exactly how many Chinese travel as tourists to other destinations. Educated estimates
put the numbers as about 500,000 to USA and one million to Europe. There are opportunities for many niche products that target different market segments, so long as the preferences and travel habits of the
Chinese are considered for every type of service.

What exciting investment opportunities are available in China in the coming decade in the sphere of tourism?

As Chinese like to explore new things, follow trends and be `cool’, marketing is a very important factor in success of tourism destinations or products. Domestic tourism is already very strong and the business part of that will be come more streamlined, providing opportunities for budget business class hotels, business travel services and low cost airlines. This will be supplemented by the growth in inbound tourism. As the environment becomes a critical issue for China over the next few years, tourism investment will have to account for its environmental footprint and social consequences. Projects focusing on eco-tourism and sustainable tourism will be popular with government and with the consumers.

How do you assess the battle between global and local players in the travel distribution business?

Local players will always have an advantage in the domestic market while global companies will be strong on outbound - they need each other and will find ways to cooperate. I believe that partnerships will be formed and more local companies will become part of global alliances, international associations, franchises etc.

Where do you see services of ChinaContact headed in future?

Many in the tourism industry in the West have not yet visited China or even attempted to do business there. Some have heard scare stories or read about how complicated the process is. Through conferences and seminars and consultation in Europe, North America, Africa and the Middle East, we aim to provide some insight into the China travel sector and bridge the gap that exists now. This often allows companies
to hear first hand accounts of those who succeeded there and gain the tools to start formulating a China strategy. By understanding what is at stake without having to travel to China, companies save money and
time, and can go there better prepared.

The next opportunity to learn about the China travel industry both as market and destination will be at World Travel Market, 6 November 2006. the WTM-ChinaContact conference 'China - the future of Travel'
will discuss tourism between Europe and China in a bilateral context and bring a large delegation of business people from China to network with their Western counterparts.

Apart from our activities in the West, we specialise on sales and marketing representations for niche markets in China, where creative marketing, strong media contacts and personal relationships in the
industry are critical. These include corporate travel, incentive travel, exhibitions and events, eco-tourism and adventure tourism.