Burgeoning Wealth, Consumer Behavior, and Golf in China

At first glance, the greens of Guan Lan Hu (Mission Hills Golf Club) in Shenzhen seem no different than those in the U.S. — carefully manicured grass, well-dressed members, and an excess of golf carts. Upon closer inspection, however, the differences become clear. In addition to caddies, golfers are served by a host of drivers, umbrella holders, and personal waitresses. In place of water bottles, members refresh themselves with glasses of beer and spirits; and when a ball goes astray, another is simply placed on the ground for a second attempt.

Welcome to the curious world of golf in China. These additional services at golf courses are a natural extension for a culture in which self-indulgence and maintaining impressions are important, and a country in which disposable income among the upper class has risen at an astronomical rate. The golf-services industry offers a unique window into the growing luxury leisure-services market in China and its impact on the tourism industry.

A Macro Look at the Chinese Consumer

China’s new upper-class consumers can be typified by a number of traits. First, many are seeking experiences that differ from those available in the mass market. Xiaolin Zheng, a native Chinese professional in her twenties currently living in Hong Kong, would much rather travel on her own. “Why suffer the discomfort of sharing a bus with 40 other people and following a strict daily schedule, when I could organize my own trip?”

Second, it is common in China to treat product and service purchases as a means of burnishing one’s social reputation. In a paper published in 2002 in the Journal of Consumer Marketing, Jai-Ok Kim, Sandra Forsythe, Qingliang Gu, and Sook Jae Moon concluded that “among those female consumers in China, clothing is regarded as a symbolic medium to demonstrate one’s social status or express one’s social image.”

Third, the typical Chinese consumer is increasingly self-indulgent, seeking products and offerings that cater to his or her personal gratification. According to a 2009 study by Ge Xiao and Jai-Ok Kim that appeared in Psychology & Marketing, individual goals of self-direction, achievement, stimulation, power, and hedonism received higher value ratings from middle-class, urban Chinese consumers than did collectivist objectives of conformity, benevolence, and tradition. The authors also noted that, “as a result of economic growth and modernization processes, it is expected that more people will acquire an individualistic and material orientation.”

China’s new upper-class consumers … are seeking experiences that differ from those available in the mass market.

China’s new upper class is also growing quickly: According to Credit Suisse’s Global Wealth Report, the country had 964,000 millionaires (in US$ terms) at the end of 2012, a 19.8% increase from 805,000 in 2010, and nearly 35.0 million individuals within the top 10% of global wealth holders, an increase of 35.6% from 25.8 million in 2010 (third only to the U.S. and Japan). Mainland China today also has the second-largest number of billionaires, according to Forbes’ 2013 Billionaires List, with 122 citizens (or 161 if Hong Kong is included), compared to the U.S. with 442.

A Micro Look at Golfers in China

There are two distinct groups of golfers in China — aging baby boomers who have saved just enough to be able to try this new luxury leisure activity, and a growing, younger crowd of self-indulgent golfers in their twenties to late thirties who are increasingly dictating the rise of more extravagant golf courses.

Tang Li is a successful executive and a graduate of one of China’s top universities. On his 47th birthday in 2010, he decided it was time to find another form of exercise because it became increasingly difficult for him to continue playing soccer. Previously, he would have never even considered golf, thinking he would not be able to afford the hefty RMB600,000 (US$98,039) annual club membership fees, even with a good-paying job at a state-owned organization. However, he soon learned from his friends that there were alternatives. Many medium-sized golf courses in Beijing offer cheaper options that do not require membership dues but do require fees based on actual playing time (RMB400-800 or US$65-130 per round of 18 holes). With help from his friends, Li has become a regular golfer. On average, he plays five to six times a month and spends about RMB20,000 (US$3,268) annually. He golfs mostly with friends and increasingly more with his business partners. Sometimes he has lunch with his friends at the golf courses, but he never drinks or lingers in the area afterwards.

Tony Wang, on the other hand, is a 32-year-old finance executive and an avid golfer. The son of a wealthy steel magnate, he belongs to China’s fu’er dai (wealthy second generation), a term used colloquially to describe the children of wealthy families in China. He was first introduced to the game of golf during his university days in Australia, and he played regularly with his small circle of wealthy Chinese classmates. He and his friends played the game mainly because it was considered a luxury sport that differentiated them from their peers. Moreover, the luxury services available after the actual game — spa, hot springs, food, and beverage facilities — sometimes influenced their repeated patronage. More often than not, they preferred golf courses near a bustling city with an active nightlife. A typical trip would involve traveling to a golf course in a nearby city during the day, enjoying the city’s nightlife, and staying overnight. After obtaining his university degree, Wang returned to China and joined Guan Lan Hu, one of the most expensive clubs in China. He played there at least once every fortnight, enjoying a full day at the golf course and then making the short drive to Shenzhen city, where he spent the night in the company of his friends.

These younger groups of golfers … have replaced golf’s most sacred tenets — love of the game, fair play, and sportsmanship — with a focus on luxury, entertainment, and general excess.

These younger groups of golfers have transformed the luxury leisure golf market in China. They have replaced golf’s most sacred tenets — love of the game, fair play, and sportsmanship — with a focus on luxury, entertainment, and general excess. Courses originally designed as places to practice and compete with friends now offer a host of other amenities. For instance, amenities at Guan Lan Hu now include a Japanese spa, mineral hot springs, a luxury hotel, meeting- and conference-room facilities, shopping centers, and a karaoke club.

The Quest for Status

To date, golf is still played by very few Chinese. Participation is concentrated among the country’s wealthy elite. While a regular golfer, Li usually plays at medium-sized courses. Wang, on the other hand, is able to afford the more extravagant courses.

According to Wang, because of the sport’s domestic lack of attention and coverage, the entry barriers are extremely high. On the development side, the expansive space a golf course requires can become an expensive venture, especially considering today’s burgeoning Chinese real-estate market. Furthermore, the same reasoning applies to in-city driving ranges, which are scarce and expensive. For the consumer, just learning to play can be an extremely costly venture, given that instructors are rare commodities. Moreover, because the game has a steep learning curve — which requires constant practice, expensive greens fees, and high costs — practice sessions attract only the elite with sufficient disposable income.

While there are membership-free golf courses that cater to the general population, most courses in China serve the wealthy elite, requiring fees ranging from RMB100,000 (US$16,339) annually all the way up to lifetime memberships of RMB3 million (US$490,196). Many of these high-end courses, while originally built for foreign golf tourists, have evolved into Chinese-style, full-service facilities. According to Wang, the Chinese elite has made golf an even more personalized game and experience — with players being treated as emperors. In addition to choosing his/her own handicap and score, each player can also choose the pace and experience of the game. For example, one could choose to enjoy a slow game with friends/business partners, accompanied by caddies and waitresses who serve food and champagne, all while enjoying the view and the scenery.

In addition, an increasing number of golf courses are being built in China and marketed toward foreign tourists, particularly Koreans and Japanese looking for discount golf vacations. Modern golf first arrived in China with the opening of the Chung Shan Hot Springs, located an hour and half’s drive from the former Portuguese colony of Macau. The intention of owner Henry Fok was to give the resort “international status, and golf fit … the bill.” This same mentality in golf-course development has been carried through the early 2000s. Chinese golfers gradually adopted these foreign traditions and etiquettes and have learned to expect the same services and amenities afforded to foreign players.

While Chinese golfers have yet to begin traveling in large numbers for the exclusive purpose of playing golf, it is easy to see the potential for China’s sports tourism to have a strong impact on golf courses overseas.

The combination of all these factors means that the Chinese golfing sector is well-poised for growth. According to the legendary Jack “The Golden Bear” Nicklaus, who helped design the Shenzhen Mission Hills Golf Club, “golf is just exploding in China.” With only 750 golf courses today and a growing upper class, China is seen as a key market for sporting-goods companies and course operators.

Global Implications

In addition to its impact on players and developers at home, golf’s increasing popularity in China, combined with a surge in the number of Chinese traveling overseas, could also have substantial ramifications for the industry beyond the country’s borders. According to the United Nations World Tourism Organization, the number of Chinese traveling abroad grew from 10 million in 2000 to 83 million in 2012. Moreover, China’s expenditures on international tourism reached RMB 624 billion (US$102 billion) in 2012, a 40% increase over 2011. With this surge in travel spending, China has surpassed Germany and the U.S. — formerly the two top-ranked spenders — in total outbound travel spending. As highlighted by Yong Chen, a specialist in Chinese outbound tourism at Hong Kong Polytechnic University, until now Chinese tourists have focused mainly on shopping, more so than any other global travelers — spending, on average, an estimated $1,230 per trip.

While Chinese golfers have yet to begin traveling in large numbers for the exclusive purpose of playing golf, it is easy to see the potential for China’s sports tourism to have a strong impact on golf courses overseas. Firstly, as weather conditions in much of China allow golfers to play only from March to October, more committed or curious golfers such as Li will often travel to nearby Southeast Asian countries — including Malaysia, the Philippines, and the Maldives. Secondly, the exclusive and famed golf courses of the U.S. and Europe appeal greatly to Chinese consumers, given their propensity to spend on products and services that burnish their social status and golf’s reputation in China as a “luxury sport” played by intellectuals and successful executives. Finally, as the Chinese middle class grows wealthier and domestic golf courses fall within their spending power, the upper class will have a greater desire to visit courses overseas that enable them to differentiate themselves from the mass market. These travelling golfers have the potential to bring business not only to the golf courses, but also to the cities that host them and to the tourism industry in general.

As China’s economy continues to grow and individual wealth among the country’s elite continues to rise at a phenomenal pace, the country is slowly beginning to see the emergence of a new upper class. These new consumers, typified by a desire for experiences outside the ordinary and for products and services that both burnish social status and cater to personal gratification, have increasingly taken up golf as a preferred hobby and pastime. This has already resulted in the growth of a distinct golf culture in China, and ultimately has the potential to significantly impact the global golf culture.

This article was written by Ting Cui, Josh Lim, Andrew Maloy, Wesley Tillu, and Jason Wang, members of the Lauder Class of 2015.

*Names were changed to protect the identity of the interviewers.

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