China’s market feels muscle of first tourism law; both package and individual tour prices are expected to skyrocket from Oct. 1 when China’s first tourism law comes into force

China’s market feels muscle of first tourism law   2013-09-29

BEIJING, Sept. 29 (Xinhua) — Experienced traveler Liu Qiang has scrapped his plan to go to Hong Kong because of what he sees as obsenely high prices during the upcoming National Day holiday week. “The cost of a four-day package tour to Hong Kong was about 2,500 yuan (around 400 U.S. dollars) previously, but it is as much as 5,000 yuan during the holiday,” said Liu, 27, who works for an Internet company in Beijing. The bad news for people like Liu is that both package and individual tour prices are expected to skyrocket from Oct. 1 when China’s first tourism law comes into force.These price rises are, in a large part, because of the law, but they are certain to unleash a torrent of gripes and acrimony in an already complaint-riddled industry. The hope is that the new regulations will help the industry to regulate iteslf in the long run.

The law includes provisions to counter the practice of zero, or even negative, fare tours. These are tours sold at or below cost price to lure ingenuous travelers who are then forced to purchase goods or tip guides while on holiday.

Travel agencies will be prevented from selling services at unreasonably low prices, or to profit by arrangements with designated stores. Travellers will not be obliged to accept any paid extras other than those specifically mentioned in contracts.

For time immemorial tour guides and travel agencies have been suspected of sharing profits with owners of stores, of taking commissions and kickbacks, but this will be illegal as of October.

“The domestic travel agency arena is a very competitive one. It’s hard for travel agents to survive through low-price services alone,” said Li Guang, general manager of the compliance office of the China Youth Travel Service (CYTS), one of China’s leading travel agencies.

The law also address the problems of unfair competition and wanton price hikes which have bedevilled the travel industry for years and exasperate the public.

“These are deep-rooted problems which attract a lot of complaints. The the key to fixing these problems lies in strict implementation of the law,” said Li Xinjian, a professor with the tourism management department in Beijing International Studies University.

Tourism insiders argue that the new round of price rises shows China’s travel market returning to normal.

“Price wars were vicious in the past, while the recent rises are a sort of reasonable return to fair competition,” said Wang Yanqi, director of the Research Center of Leisure Economy of China.

China’s domestic travel market is the world’s largest. Domestic tours totalled 2.96 billion in 2012, according to the China National Tourism Administration.

“The new law is not to impose restrictions on tourism shopping, but to target guides or agencies charging hidden commissions,” said to Li Guang.

There are also calls for strict supervision of prices at popular locations.

“If prices were at normal levels in tourist attractions, there would be less scope for illegalities such as forced purchases and outrageous commissions,” Wang Qiyan added.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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