China

China - U.S. TourismLeadership Summit

October 27th, 2014

China Outbound Travel Market

China Economic Overview

2010 2011 2012 2013

Population (m) 1,341 1,347 1,354 1,361

Nominal GDP (US$ bn) 6,040 7,298 8,447 9,250

Real GDP growth (%) 10.4 9.3 7.7 7.7

GDP per head (US$ at PPP) 4,361 5,414 5,432 6,796

Household Consumption

Expenditure (%) 8.2 10.3 9.4 8.0

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Emerging market growth2013/14 average

% year

4

3

GNP Growth 2012-2013Overview

10

g

8

7

6

5

2

1

0

China Outbound Travel

120

100

80

60

40

20

0

11497.3

8270.2

57.38

47.545.8440.95

34.523128.85

16.620.22

8.43 9.2310.4712.137.14 7.59 8.18

2012:

2013:

2014 (est.):

2020 (est.):

83 million - 6% of China’s population

97 million - world’s #1 source market

114 million outbound spending $140 billion

200 million outbound

19

95

1996

19

97

19

98

19

99

20

00

20

01

2002

20

03

20

04

20

05

20

06

20

07

2008

Destinations of Chinese Travelers

Only 10% of Chinese outbound travelers flying long-haulOnly 1.5% of Chinese outbound travelers visiting the U.S.

Key China Source Markets

Chinese Travel to the U.S.

Aspirational Long-haul Destinations for Chinese

2013 2014 63%

58% France

50% 54%

53% 50%

United States of America

Australia

42% 44%

42% 43%

37% 38%

35% 37%

32% 36%

Canada

New Zealand

Italy

United Kingdom

Germany

24% 24%

20% 22%

Brazil

Greece

Question: What country(ies) will you likely visit during your next holiday to a destination outside ofAsia? Select all that apply.Base: China intercontinental travelers (2013 N=1,475, 2014 N=1002) Source: Brand USA Custom Study

Estimated Total Long Haul Departures

United Kingdom

France

Australia

China

Canada

Germany

Japan

Russian Federation

Brazil

India

Italy

Korea, Republic Of

Spain

Switzerland

Argentina

Mexico

Sweden

Belgium

30000

25000

20000

15000

10000

5000

0

*Tourism Economics

10

Market Share of LongU.S. vs. Competitors

2000-2024

Haul China Outbound Travel

30%

25%

France

United States

Russian Federation

Germany

Australia

Switzerland

Austria

Canada

United Arab Emirates

Spain

20%

15%

10%

5%

0%

11

USA Overseas Arrivals

6,000 United Kingdom

Japan

Brazil

China

Germany

France

Korea, Republic Of

Australia

India Italy

Colombia

Venezuela

Argentina

Spain

Netherlands

Sweden

Switzerland

Russian Federation

Chile

5,000

4,000

3,000

2,000

1,000

-

Year

Arr

iva

ls (

00

0)

Chinese Visitors to the U.S.

Key Message: China has soared up the

rankings to #5 in terms of overseas

visitor number and spending in the

in 2013, and is projected to rise to

become our top overseas source

U.S.

market within 6 years.

2003

2012

2013

2014

2017

2018

Under 200,000

1.4 million

1.8 million (+22.6%) #5

#4

#3

#2

overseas

overseas

overseas

overseas

market

market

market

market

est.

est.

est.

2.18

3.66

4.31

million

million

million

(+21%)

(+18% )

(+18%)

Sources: U.S. Department of Commerce, ITA, National Travel and Tourism Office

Chinese Expenditure in the U.S.

Spend Per Person Per Trip: $6,000 spend per

person per trip to the U.S. makes Chinese the highestspending visitor group per person per trip to the U.S.

Travel Spend: China’s middle and upper classes

spend 19% of their annual salaries on overseas travel– dramatically more than any other source country

Luxury Spend: 75% of Chinese tourists purchase

more than 3 luxury items per trip

Global Force: Chinese tourists make up 25% of

global spending on luxury goods

China Airlift to the U.S.

China’s Gateway Cities to the U.S

Beijing

Shanghai

Guangzhou

Chengdu (June)

Wuhan (December)

Hangzhou(April 2015)

Anchorage

China Airlift to the U.S.

U.S. Gateway Cities to China

Los Angeles

San Francisco

New York

Honolulu

Seattle

Boston

Chicago

Houston

Dallas

Saipan

DetroitWashington D.C.

New China-U.S. Flights 2014-2015

January 2014 Beijing to Honolulu (Air China)

April 2014 Beijing to Honolulu (Hawaiian Airlines)

June 2014 Beijing to Boston (Hainan Airlines)

June 2014 Beijing to Washington (Air China)

June 2014 Shanghai to Dallas (American Airlines)

June 2014 Chengdu to San Francisco (United Airlines)

August 2014 Guangzhou to New York (China Southern)

October 2014 Shanghai to Guam (United Airlines)

December 2014 Guangzhou-Wuhan to San Francisco

(China Southern)

January 2015 Changsha to Anchorage/Los Angeles

(Charter)

April 2015 Hangzhou to Los Angeles (Hainan Airlines)

May 2015 Beijing to Dallas (American Airlines)

U.S. Visa Updates

Interview

2011:

Now:

Wait Times:

over 50 daysunder 5 days

4-5 days France &Australia:

Close to 90% of non-immigrant applications from

Chinese nationals are approved

New on-line system allows Chinese applicants to: Schedule visa interview appointments

Pay visa processing fees

Check on status of issued visas on-line rather

than person

in

Next Goal:

the U.S.?

5-year multiple-entry visas for Chinese to

China Travel Trends

Preferred Leisure Pursuitsby Chinese Middle/Upper Class

Key China Trends

● Rapidly Evolving Profile of Chinese Travelers Leisure travel soaring: 63% share and rising

Package tours still key (70% share) and will dominate

for the next decade Rapid shift from multi-destination to multi-experience

Accelerating shift from package tours to air-tel/FIT –

30% and rising thanks to visa flexibility and rapidly

growing sophistication of Chinese travellers

$1,100 spent per day when traveling

(excluding accommodation)

Implications Beyond-the-Gateway Potential: the Chinese travel

trade are hungry for new itineraries and new tour

products

FIT/Luxury Booming: FIT/luxury travel products are

rapidly becoming established and will see the greatest

growthover the coming decade

MICE Market: China is a huge MICE market, esp. for

mid- size and large-size incentive groups to the U.S.

Duration of Next Trip: 2014

1%

%

3 nights orless

Total Likely Visit U.S. in Next Trip

10%

8%4-‐6 nights

57%

55%7-‐13 nights

29%14-‐20 nights 33%

4%

4%21+ nights

Question: How long will this holiday likely be?Base: China intercontinental travelers (N=1,002), China travelers who will likely visit the U.S. in theirnext intercontinental trip (n=539) Source: Brand USA Custom Study

Months Likely to Travel

2%January 3%

4%February 5%

3% Total

Likely Visit U.S. in Next Trip

March 2%

4%April 5%

17%May 18%

15%June 17%

20%July 22%

21%August 23%

17%September 19%

29%October 29%

4%November 4%

3%December 3%

Question: In what month(s) will you likely take this holiday? Select all that apply.Base: China intercontinental travelers (N=1,002), China travelers who will likely visit the U.S. in their next intercontinental trip (n=539)Source: Brand USA Custom Study

Booking Window for Pre-packaged Holiday/Guided Tour Packages - 2014

1 day or less/did not reserve inadvance

2 to 6 days

1%2%

Total

Likely Visit U.S. in Next Trip11%

10%

27%28%1 to 2 weeks

23%25%

27%

3 to 4 weeks

1 to 2 months 23%

8%8%3 to 5 months

2%3%

0%1%

6 to 12 months

More than 1 year

Question: How far in advance of your departure date did/will you book the travel products for this holiday? Select one option from the drop-down box.Base: China intercontinental travelers who booked /will likely book pre-packaged holiday or guidedtour package (N=360), China travelers who will likely visit the U.S. in their next intercontinental trip(n=194)Source: Brand USA Custom Study

D

Chinese Destinaiton Selection Drivers

estination Selection

“Affordability”

“Dining”

“Safety”

Criteria

61%

58%

57%

Destination Selection Tools

1. Travel Agencies: travel agencies remain the dominantdestination selection tool with most Chinese travelersstill using local bricks-and-mortar travel agents and travel agency or airline websites in making a final destination selection

2. Online channels: including destination websites,travel portals, social networking channels, and blogsare soaring in importance as a destination selection channel

Word of Mouth: ”bragging rights” are extremely important in the China market -- being able to boast to friends and family about having visited a given destination and purchased given luxury goods –increasingly on-line word of mouth is becoming key via blogs and video sharing sites

3.

China Travel Trade Landscape

Total Outbound travel agencies in China: over 1,500

Top 10 travel

🔷 CITS

🔷 CYTS

🔷 CTS

🔷 TTS

🔷 U Tour

agencies:

Jinjiang Tours

Spring Intl Travel

GZL

Nanhu International

🔷

🔷

🔷

🔷

🔷

Travel

Guangdong CTS

Top MICE agencies:

🔷 CITS MICE

🔷 CTS MICE

CYTS MICE🔷

Top OTAs:

🔷 Ctrip

🔷 Qunar

Tuniu

E long

🔷

🔷

China Media Landscape16 National dailies with circulations of 480,000+

Over 200NewspapersRegional newspapers with circulations of 260,000+

50 Lifestyle, tourism and fashion magazinesAverage circulation of 80,000+

CountlessMagazines

Travel TradePublications

11 Travel Trade magazine, circulations of 50,000+2 Travel Trade newspaper, circulations of 150,000+

13

Major Newswires: China News Service, China News Agency, etc.

Daily Broadsheets/Newspapers: Global Times, China Daily,Shanghai Morning Post, Southern Metropolis Daily etc.

Weekly Lifestyle Publications: Lifestyle, The Bund, The

Weekend, Let’s, Traveler Weekly, Grazia, etc.

Power Fashion Publications:Esquire, Modern Bride etc.

Vogue, Cosmopolitan, ELLE, GQ,

Leading Consumer Travel Publications: Condé Nast Traveler,

Voyage, National Geographic Traveler, Top Travel, etc.

Video Sites: iQiyi, Phoenix, Channel Young, World Traveller etc.

Radio stations

dscapeChina Online and Social Media Lan

1.37 billion population

686 million internet users as of June 2014,5% YoY growth over December 2013

1.24 billion mobile users

800 million mobile internet users as of April

2014

53% of Chinese book their hotels online or via mobileapps

61% ask for opinions online before a purchase/destination selection

73% go online to give their opinion on a purchase they made

Weibo:users

Wechat:

500+ million users with 67 million daily active

600+ million users

China Market Recap: Alignment of Key Factors Size: massive market size of 1.3 billion

Potential: only 7% of this population now traveling overseas –versus

25% for Korea

Growth: number of outbound travelers to double in next 6 years to200 million

U.S. Market Share: only 1.5% of outbound Chinese travelers are now traveling to the U.S.

Desire to Visit: rapid growth in aspiration to visit the U.S.

Disposable Income: Chinese incomes growing at 10-20% per year

Willingness to Spend: 19% of disposable incomes spent on travel

RMB appreciation: making travel to the U.S. increasingly affordable

U.S. Visa Barrier: now manageable for Chinese travel trade

Booming Airlift: new gateways and airlift to the U.S. rapidly developing

Hungry Travel Trade: want new U.S. packages beyond the gateways

Hungry Media: on-line and off-line media hungry to feature the U.S.

Spend: per visitor per day already leads all overseas markets

Arrivals: #1 overseas market for the U.S. within 6 years

Brand USA in China

2015 Brand USA China Pillars

increased investment in U.S. travel promotions

Markets throughout China

Mailman

partners

Educate Travel TradeNationwide

Secure the development of a wide range of new U.S. tour product beyond the traditional U.S. gateways

Co-op with Chinese travel trade & airline partners tosecure

Extend Brand USA marketing programs intoSecondary

Target both Leisure & MICEmarkets

Secure launch of new airlift/new gateways/new airlinepartners

Rapidly boost earned media coverage/visibilitynationwide

Launch brand advertisingcampaign

Leverage booming Online & Social Media channelsvia

Brand USA China Team

Yoichi Hayase

Asia Strategy Director

Michael D. Merner

Managing-‐Director, Asia

Mavis Zheng

Beijing OfficeDirector

Diana Liu

GuangzhouOffice Director

Tina Yao

Shanghai OfficeDirector

Jenny Guan

Travel Trade MarkeZng Manager

Sunday Wang

Public RelaZons& Co-‐opManager

Spring Zheng

Travel Trade MarkeZng Director

Anita Jia

Public RelaZons& Co-‐op Director

Tapping the China Market

Send press releases, newsletters, promotions,images & videos to Brand USA China

Translate into Chinese – at a minimum, a simple fact sheet and a map

Host China FAM groups

Join the Brand USA Mission or have the Brand USA China team set up a one-on-one Mission for you

Have your website translated into Chinese by

Mailman

Buy into

Buy into

and co-hosted on www.GoUSA.cn

a Brand USA China co-op

the Brand USA China Market Entry

Program for a year-round coordinated program ofPR, Travel trade, and digital programs

Doing Business in China

Chinese Psyche 101

Emphasis on the

Collective not individual

(harmony)

Respect for authority

Patriotism

Face (Mianzi): winning/losing/giving

Relationships (Guanxi):

keeping Guanxi

the art of building and

Meeting Mechanics

Seating Protocol: in China, the first person who enters the

room is the head of the group – seated directly opposite or

immediately next to will be the principal host

Handshake is soft -- sometimes bow

Have Chinese cards – don’t write on them

Surnames come first in China

Conversation Topics: avoid “western-style” jokes, politics or

religion. Good topics: Chinese food, sports, places one should

visit in China, places the counterpart has visited in the U.S.

Be ready for personal questions – how much do you earn?Are you married?

If a Chinese person gives you a compliment, deny it

graciously -- modesty is highly valued in China

Use simple English and speak slowly and clearly

Meeting Mechanics

Gift-giving:

Gifts indicate that you are interested in building a

relationship

Gifts should always be wrapped, but do not use plain black

or white paper because these are the colors of mourning.

Beware of unlucky numbers, superstitions – consult with us

Gifts are received but not opened unless your Chinese

host does so firstPatience: at times, Chinese can appear to be stalling before

moving to business -- they are working towards building as

great a mutual respect as possible.

Survival Tips

Only drink bottled water –even

brushing teeth

Chinese point at objects with an

open hand instead of the index

finger Beckoning to someone is done with

the palm facing

down -- avoid beckoning with your index finger

Learn a few words of Chinese

Don’t try too hard to "go Chinese" – keep the above

guidelines in mind, but just relax and be yourself!

Xie Xie!

Thank You!!!