3 Market Segment Analysis
3.2 Target Customers
3.2.1 Chinese Tourists (Chinese Outbound Tourism)
A segment that is important for us and that we wish to focus our energy on is the Asian market, more specifically, the Chinese one. By the end of 2012, China had become the country with the highest expenditure on travel abroad with US$ 102 billion for that year. It is a 40% increase compare to the US$ 73 billion of 201113. Chinese tourists are travelling out of their country and are spending more money abroad each year and as shown previously, Spain and Valencia should continue to see its number of Chinese tourists increase.
One might think that with the ethnic diversity and huge territory of China, a typical Chinese tourist would be hard to define. This is true to some extent. However, for the majority of the Chinese nationals, the economics and political barriers are still too high to allow for international tourism and therefore spends their holidays in China. As a result, most of the Chinese international tourists come from the 3 most economically developed regions; Beijing, Shanghai and Guangzhou14.
The typical Chinese tourist used to be a first time international traveler who preferred organized tours to independent travel and wanted to see as many countries as possible in a short period of time. Therefore, the Chinese traveler would mainly stay in the most touristic areas, like Paris and Barcelona for example. However, there has been a shift in the travelling behavior of the Chinese tourist, a kind of “maturation”, moving from tour group to individual travel oriented. The face of the average Chinese tourist is now changing as he is becoming younger, richer, with travelling experience and bases his decisions on the overall experience instead of only looking at the costs15. We can classify him/her as a young professional, male or female, between 20 to 40 years old, single or married, without children and with a relatively high salary and is computer and internet savvy.
He/she has a basic or intermediate level of English, but inexistent or limited knowledge of other
13 UNWTO, China – The new number one tourism source market in the world, Press release April 4th 2013
14 Daniel Toma Gaimundiz, El Turismo Chino en Espana (The Chinese tourism in Spain), Universida de Sevilla, 2011, p.27.
15 ITB World Travel Trends Report 2011, p.16.
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European languages. He/she is looking to escape the fast pace of his everyday life and wants to get a deeper, more local and relaxing travelling experience, but without being totally disoriented and keeping a level of control. He/she can afford and is willing to pay a little extra to get what he/she wants, but is still conservative with money. He/she travels alone, with a friend or spouse. This new Chinese tourist perfectly describes our target customer. We believe that our customers are looking for an authentic Spanish travel experience, with an excellent and personal customer service, in a relatively stress free environment, where people are aware of their culture. We plan to offer exactly that to our Chinese customers.
Chinese nationals have limited vacation time and the travelling distance from China to Spain makes the destination unattractive for short (3 days or less) trips. The average stay of Chinese tourists in Europe was, in 2009, 9.2 days. Chinese residents have 3 main holiday periods: Chinese New Year (around February, depending on the Lunar calendar), May 1st and the Chinese National day (in October). Those are the most common and popular time of the year for a trip to Europe. There are also shorter holidays like Western New Year, Tomb Sweeping Day, Dragon Boat Festival and the Mid-Autumn Festival, when Chinese nationals might be able to travel abroad and visit Spain 16.
3.2.2 European Tourists
Another market segment that is of interest to us is the European segment. Like stated by Eurostat for the year 2012: “Spain was for EU residents the number one foreign destination, in terms of number of trips as well as number of nights spent or expenditure.17” With 71% of the overnight stays in Valencia for that year18, we hope to capture some part of this important segment by offering something local yet different, comfortable and with excellent customer service. However, a recent study suggests independence between the top five tourism source countries for Spain19. Looking at Europe as one big market segment would pose many problems, therefore, we decided to focus our
16 http://www.timeanddate.com/calendar/?year=2013&country=41
17 Eurostats, tourism statistics – top destinations
18 Valencia Tourism
19 Gabriela Alvarez, Suhejla Hoti and Michael McAleer, Modeling Tourist Arrivals to Spain from the Top Five Source Markets, School of Economic and Commerce, University of Western Australia, 2007
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energy on French and English European speaking countries, specifically the UK, France and Belgium. A quick look at Table 1 International overnight stays by country of origin in Valencia shows us that these countries ranked second, third and seventh for the most overnight stays in valencia in 2013.
We will aim at attracting tourists that have no or a limited knowledge of the Spanish language, that are looking for culture, to experience local festivals, history, sun and beaches, while staying in an accomodation that is central to their interests and that provides excellent customer service. Once again, our knowledge of the French and English language will allow us to offer the tourists from France, the UK and Belgium services in their own language. We estimate that our average customers’ age will vary between 25 to 45 years old. They will be travelling with their spouse or with friend. With our positioning and pricing policy (which is detailed in section 4.2 and 0 below) in mind, we will focus on customers from the middle class of these countries. Our excellent location will contribute to attract customers looking to experience Valencia’s old town, while our excellent customer service, provided with a personal touch will hopefully have them return and/or recommand us to their friends and on the internet.
European workers are entitled to a minimum of 20 working days of paid vacation per year (statuary minimum annual leave). This doesn’t take into account any national holidays, paid or not, like Christmas or new year. France requires companies to offer a minimum of 30 working days of paid vacation per year in addition to the paid holiday on May 1st20. The United Kingdom’s full time workers are legally entitled to 28 paid working days of vacation while Belgium’s one have 20 working days of vacation plus 10 national holidays. Therefore, European citizens have time to travel and visit other countries, specially those closely located like Spain. In the last 10 years, tourists from France, Germany and the UK have been visiting Spain in big numbers in August and September, as well as in May.
20 Ray Rebecca, Milla Sanes, and John Schmitt, No-vacation nation Revisited, May 2013
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They can access the country by road (cars and buses), train or planes. The emergence of cheap European airlines makes it fast, easy and cheap to travel by air in Europe. For example, it is relatively easy to find a one way plane ticket from the UK to Spain for under 45 euros during the high season (July and August) on the Internet with airlines like ryanair.com. The fare can sometimes be as low as 25 euros for the same months, which makes taking a holiday in Spain very affordable and attractive. A 2014 study by eurostat has shown that nearly all of the European tourists preferred a neighboring or nearby destination for international trips, with the exception of the UK, where Spain is the most popular destination21, and getting to Spain by road is still the most popular mean of transportation for most of the European tourists.
3.2.3 Spanish Visitors
Like mentioned in section 3.1.1, a high numbers of Spaniards vacationers, 92% of them to be exact, took some vacation in their own country with at least 4 overnight stays22. With our great location, old town and close to the beach, we will attract vacationers that are looking for culture and gastronomy as well as the sun/beach seekers. Those two categories represent more than 40% of the Spanish vacationers, with a majority of them being men or women aged from 30 to 50 years old that are married23. The sun/beach seekers usually travel in summer, from June to September, as well as the majority of the culture and gastronomy tourists24. In a similar fashion to other European countries’ workers, the Spanish work force is presently entitled to a minimum of 22 working days of vacation plus another 12 days of paid holiday25. This provide an opportunity for locals to travel, not only during summer, but all year long and should deliver Luna Y Comida a flow of customers during the high as well as the low tourist season. We are aware that the last years have been
21 European Commission, Eurostat, Tourism statistics – top destination
22 Demunter Christophe & Dimitrakopoulos Chryssanthi Domestic Tourism, European Commission, Eurostat,
23 Mallou Jesus Varela, Eduardo Picon Prado and Teresa Brana Tobio,Segmentation of the Spanish Domestic Touristic Market, University of Santiago de Compostela, Psicothema 2004 vol. 16, no 1, p.76-83.
24 Mallou Jesus Varela, Eduardo Picon Prado and Teresa Brana Tobio,Segmentation of the Spanish Domestic Touristic Market, University of Santiago de Compostela, Psicothema 2004 vol. 16, no 1, p.76-83.
25 Ray Rebecca, Milla Sanes, and John Schmitt, No-vacation nation Revisited, May 2013
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economically hard for Spain, but we this as an opportunity. We believe that when times are difficult, people will be even more incline to opt for a local trip rather than an international one.
Based on our understanding of the target customers, we expect our client segmentation to be as shown in Figure 5
Figure 5 Expected customer segmentation, Luna Y Comida
Chinese, 35%
Spanish, 8%
Europeans, 50%
Others, 7%
EXPECTED CUSTOMER SEGMENTATION
LUNA Y COMIDA
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Most of the time, starting a B&B requires owning a house and the cost associated with buying a new property are quite high. The house market varies depending of the location and the economy.
Therefore, the starting cost can increase or decrease. The general economic climate of Spain at the moment has soften this entrance barrier, but it still remains relatively high and makes it hard for new entrants to enter this industry. However, the same economic climate and high unemployment rate has forced residents to become more ingenious to make some money and many homeowners are renting extra rooms in their house, with a very low entry barrier. This is made possible with the internet and websites like airbnb.com. Still, we estimate the threats of new entrants to be relatively low.