Luxury goods draw Chinese

Beijing » On his next trip to Hawaii in the spring, Qiang Gu plans to shop his way through Maui.

Sure, he’ll visit tourist sites, but the Beijing resident plans to spend most of his time putting purchases on his Hawaii UnionPay card.

Issued by China CITIC Bank, the relatively new credit cards sport the official Hawaii tourism logo and a picture of three hula girls.

"You have the same brands as we have in China, but they are cheaper in the States," he said.

Gu, who is the manager of the Beijing CITIC Building Sub-branch that houses an outbound travel club in the Chaoyang District, said he is far from an anomaly. A 17-member group that he escorted to Hawaii in 2008 dropped about $219,300 at Duty Free Shopping (DFS). Some of his more affluent clients have spent $30,000 per day, he said.

While Hawaii’s golden sand and shimmering waters beckon travelers the world over, it is the sparkle of high-end jewelry and polish of luxury goods that more often catches the eye of Chinese travelers. Only 63,000 Chinese tourists are expected to visit Hawaii by year’s end; however, their per-person-per-day spending — which has fast become the highest of any visitor group — has made them hard to ignore.

The first visitors from emerging markets tend to be higher-end since travelers face greater obstacles, said Cy Feng, an economist for the Hawaii Tourism Authority.

Cumbersome visa policies, the lack of direct flights and limited visitor marketing in China have made Hawaii a hard sell against less expensive, closer sun-sand-and-surf destinations. Policies that prohibit entire Chinese families from traveling to the U.S. without demonstrating that they have high-financial reserves or own substantial business interests in China also ensure that those who make it will be more affluent. However, based on trip preferences and buying patterns, the upward trajectory is expected to continue after the newness wears off, Feng said.

Local retailers and financial institutions are already preparing for the growth. High-end retailers like Tiffany & Co. have hired Mandarin-speaking employees, put up signs in Chinese and begun to translate their advertising collateral, said John Geppert, group director of the Oahu Market for Tiffany & Co.

"We do global outreach," Geppert said. "Interest grows as we are able to reach further into the China market."

While a lot of Chinese travelers are cash buyers, many like Gu now carry the Hawaii UnionPay card, and numbers are expected to reach 1 million within three years.

Bank of Hawaii entered earlier this year into a formal agreement with China UnionPay that allows credit and debit card holders to use the card without an international surcharge at BOH merchants and machines.

About 98 percent of merchants at Royal Hawaiian Center accept the China UnionPay debit and credit cards, said Sam Shenkus, marketing director of The Festival Cos., which is owned by Kamehameha Schools and managed by The Festivals Cos.

"I can’t tell you the sales volume, but individually they are making some very, very big transactions," Shenkus said.

Chinese shoppers frequent stores like Tourneau looking for Hawaii exclusives, she said. Vacheron Constantin watches, which are handmade in Switzerland and take up to 10 months to make, are popular with the Chinese since "so few of them are available in China," Shenkus said. Watch prices range from $35,000 to $45,000, she said.

Other cultures might find it odd that the Chinese, who live in what is arguably the manufacturing and knockoff capital of the world, spend so much time shopping on their Hawaii trips. However, the fascination is steeped in ancient culture, new consumerism and economics.

Most Chinese do not understand why they should pay extra or jump through more hoops to see Waikiki’s waves versus those in Hainan, which markets itself as the Hawaii of China, said Benny Wang, director of Xinhua Travel’s international department. On average, Chinese travelers would pay $2,924 for a five-day air, hotel and transportation package to Hawaii, while a comparable vacation would cost just $731 in Thailand, Wang said.

But talk to the most affluent Chinese of the shopper’s paradise that awaits them at Luxury Row, Victoria Ward Centers, Royal Hawaiian Center and Ala Moana Center, and suddenly they are Honolulu-bound.

"Hawaii is the place where superstars and VIP go to play," Wang said. "Everyone goes there to shop."

To Chinese visitors, Hawaii is the kind of destination where all good shoppers find heaven. Sure, they’ll plan to drive by Diamond Head and Blow Hole and maybe visit Iolani Palace, but they’ll spend serious time at luxury retailers like Tiffany & Co., Rolex, Coach, Gucci, Hermes, Chanel and Louis Vuitton.

Chinese are born shoppers who desire to purchase authentic, unique, quality merchandise as gifts to satisfy their cultural obligations and as a self-reward, Wang said.

"Chinese people like to spend money for luxury goods, and in their mind Hawaii is the top destination to do this," he said while sipping coffee at the Peninsula, an upscale Waifujing hotel located in the Dongcheng district of Beijing, which is one of the capital’s most famous shopping streets. The five-star hotel is just steps away from some of the same luxury retailers that line Waikiki’s most robust shopping districts.

Outside the doors, Western and Eastern tourists can find street vendors surreptitiously selling Rolex watches, and plenty of market shopkeepers anxious to argue penny sales. Chinese shoppers tend to avoid these tourist traps, preferring to spend their yuan in farther-away destinations that offer authenticity, quality and tax breaks, Wang said.

"Shopping is the first job of the Chinese traveler," said Chuang Liu, manager of the America Department for ETI Holidays and Hua Yuan International Travel Co. Ltd. "Every night in Honolulu, they are shopping until 11 p.m. It’s not unusual for them to spend as much as 60 percent of their vacation in stores."

Chinese like to purchase nice gifts because they indicate closeness and feel cultural pressure not to return empty-handed, Wang said.

"If you pay a lot of money for a gift, you are showing the recipient how much that you love them," he said, adding that even an average Chinese outbound traveler intends to spend around $1,800 on shopping alone.

Most nights, Chinese shoppers flock to Royal Hawaiian Center, the shopping mall on Hawaii’s 50-yard line of tourism, Shenkus said.

Businessmen carrying brand-specific lists from their wives are still the most visible Chinese shoppers; however, more families are appearing as leisure travel gains popularity and the Chinese build more personal wealth, she said.

"When you see a family, they are normally at the higher end of Chinese society," she said. "Families don’t get approved if they are flight risks, so they are often industrialists who own lots of companies."

Families are less likely to carry shopping lists, but it’s still all about finding familiar brands, Shenkus said.

"They want authentic designer items that they know were made in Europe or the U.S.," she said.

These brand-focused buying sprees reflect the growing demand for a better lifestyle that has accompanied China’s economic rise. The country just surpassed Japan to become the world’s second-largest economy after the U.S., and its gross domestic product is expected to grow a healthy 10 percent in 2011.

"By 2040 China could be the largest economy in the world," said Michael Merner, Hawaii Tourism Asia’s executive director.

China’s recent economic boom has seen the explosion of a new middle and upper class willing and able to spend on high-end, long-haul travel, Merner said.

But just because Chinese travelers can spend, that doesn’t mean they’ll do so foolishly. Some of Hawaii’s allure is that the luxury goods come at a veritable bargain, Liu said.

"The price is much cheaper in Hawaii. Sometimes it’s as much as 60 percent off," he said.