Tourism's biggest boon: Mainland Chinese

June 7, 2013: 8:24 AM ET

Mainland Chinese make up the fastest-growing group of tourists in the world. Here's how people in the hospitality industry are responding.

By Jennifer Reingold, senior editor

city-hong-kong-620xaFORTUNE -- In 1995, Sheraton opened its first hotel in Beijing -- called the Great Wall Sheraton. "It was an enclave for Western travelers," says Frits van Paasschen, CEO of Starwood Hotels and Resorts Worldwide. The only Chinese were the employees. Today, Starwood has 120 hotels in China, with another 106 under construction. Chinese tourism is the biggest single factor driving Starwood's growth, not only in China but also in the rest of the world.

That growth means the tourism industry has to think very differently about how it markets to the Chinese tourist, both at home and abroad. In a panel at Fortune's Global Forum in Chengdu, China, van Paasschen, Fan Min, vice chairman and president of Ctrip, a Chinese travel services company, and Vincent Lo, chairman of the Shui On Group, a Hong Kong-based development and construction company, all say the Chinese traveler is the most important thing to happen to the tourism business in decades.

MORE: Complete coverage of the Fortune Global Forum

Already, Starwood (HOT) offers slippers and in-room tea makers, as well as Mandarin speakers in hotels popular with the Chinese. But van Paasschen admits that the tourists are sometimes disappointed that they aren't catered to more than that. That's partly because Chinese tourists who travel within China are used to a higher level of service, both because many of the hotels in China are much newer than they are in the rest of the world and because the low cost of labor means that staffs are larger. That can lead to disappointment; Fan tells the story of a tourist who actually filed a lawsuit, claiming that a four-star rated hotel he stayed in in New Zealand was not worth any more than two.

The speed of the market's explosion has come as a shock, says Lo, particularly in Hong Kong, where 60% of visitors come from the mainland. Many of them are shopping for luxury goods, which are more inexpensive there. "That was totally unexpected," says Lo, "even 10 years ago." Some Hong Kong natives have taken to grumbling that they feel pushed out in their own city, unable to get into restaurants or shows because of the influx of tourists.

Still, that's not a bad problem to have -- and as the economy continues to grow, the rate of Chinese tourism will continue to rise at an even faster pace. Already, more than 50% of Chinese white collar workers have a passport, compared with less than 20% in the United States.

Their wanderlust isn't likely to stop, says van Paasschen. "The average affluent Chinese lives in a city, with an automobile and a closet full of shoes. But the one thing you can't saturate is experiences. They're completely non-depletable. "

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