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1 quarterly market report China July - September 2008 Market Highlights # of outbound visitors: 26.5 million from January 2008 till July 2008 % change from previous quarter: 17.72% up from same period in 2007 # of visitors to Canada: 89,485 January 2008 till July 2008 % change from previous quarter: 9.70% up over same period 2007 Comments / Other information: The number of outbound tourists from China will continue to rise from 2008 and beyond particularly as, unlike other destinations, China is not being affected by the global credit crunch. The earthquake in May 2008 in Sichun Province as well as the Olympic Games in August 2008 hampered traffic to long-haul destinations in Summer 2008 Air Capacity 1. Due to high oil price, Cathay Pacific reduced flights by 10 flights per week between Hong Kong and Los Angeles. Flights between Hong Kong and Vancouver are 17 flights per week currently, which was reduced by 4 flights from the Summer, and will continue reducing to 14 flights per week from 26 th October. Flights to Australia will be increased with additional 8 flights per week, and flights to Europe will be operated by bigger aircraft 2. Air Canada will reduce overall capacity between Canada and China. Vancouver-Beijing, reduced from daily to 3 times weekly, and 4 times weekly Toronto-Beijing. Vancouver-Shanghai reduced from daily to 4 times weekly, and 3 times weekly Toronto-Shanghai. These reductions will be effective winter 2008/09 1

2 4. Air China reduced one flight per week between Beijing to Vancouver from daily flight to 6 flights weekly 5. Continental Airlines will have direct flights between New York and Shanghai available in March Hainan Airlines will have Beijing-Toronto-Beijing flight from Feb 09 with services on Airbus Air China will have Beijing-Toronto-Beijing flights available from fall 2009, once the new aircraft are delivered. Economic / Political Environment GDP growth: forecasted economic growth: unemployment rate: 4.0% inflation: consumer price index: 10.2% for Q3, with 10.4% in the 1 st half year 10.1% increase in the second quarter, and 9.8% increase in 2008 according to World Bank forecasts see CPI 6.6% predicted for Q3, with 7.9% rise from Jan 2008 till June 2008 exchange rate: June 2007, 1 CAD=7.16RMB, Sep 2008, 1CAD=6.39RMB net national disposable income: 14.4% increase for Chinese urbanites from January 2008 till June 2008 Comments / Other information The Chinese economy continues to show strong growth - but inflationary pressures and continuing gap in income between urban and rural dwellers are big concerns. 2 Quarterly Market Report

3 Emerging Tourism Trends 1. The travel industry, including online travel players acknowledged that the Olympics, the snowstorm, the Sichuan earthquak and the shortened May holiday, have served to constrict the growth in long-haul destination traffic. Despite these short-term challenges, the long-term prospect of travel market in China remains strong, especially with the increased consumption power of Chinese consumers. Many leisure and business travellers have delayed trips until after the Summer Olympic Games. 2.Hong Kong visitor arrivals continue to rise with 1.7 million travelers from mainland China at 19% growth in July. Hong Kong is the No. 1 outbound travel destination per the Nilson Report. 3. Per a recent Nilson Report, the key purposes for outbound travel for Chinese travellers are sightseeing (81%) and shopping (60%), with the most satisfiction coming from the following countries/areas: Japan, Australia, UK, Singapore, US, France, Hong Kong and Macau 4. Israel has received ADS status and the first tourist groups to Israel will start from 15 th September 5. In September, China National Tourism Administration (CNTA) signed a memorandum of understanding with Samoa for ADS groups 6. China and North Korea will sign a tourism agreement to open travel between the two countries from May ADS groups to the USA started in June of this year, and US Embassy expects to have ADS visas open to all cities in China by the end of Market Development Activities China 3

4 See info below for all CTC activities CTC Activities Trade Development Fam tours 1. MICE (Meetings, Incentives, Converences & Events) had a familirization tour with five Chinese coroprate clients plus one CYTS travel agent. They visited BC and Alberta from July 15 till July 26, focused on Meetings and Incentive traffic to Canada. 2. Maple Foliage fam tour - eight Chinese travel agencies from Beijing, Shanghai and Guangzhou will be in Ontario and Quebec for fall products from 28 th September till 10 th October. 3. On line Canada Specialist Programme lunched in June. The CTC is encouraging travel trade to complete online registrations. As of mid-september there were approximately 300 qualified participants. 4. Are continuing to develop and distribute CTC online E newsletters to trade from September. 5. Hosted a VIP dinner for 30 General Managers/Presidents of key travel agenices from Beijing and Shanghai who, met CTC Chairman and Canadian partners. 6. Recommended 3 key travel agencies from Beijing and 3 travel agencies from Shanghai for special initiative with the Canadian Embassy for tourist visas 7. FIT products based on the Perfect Family project are being developed in cooperation with TPI and CYTS Canada. There are 8 itineraries launched in the market 8. More than 110 travel trade persons joined in the Perfect Family unveiling press-conference and evening reception. Family travel products are introduced to Chinese trade 9. Canada lost a project bid for 2,500 MICE travellers to Vancouver in January 2009, due lack of air capacity and high ticket prices Consumer Development 1. The Perfect Family webpage has been developed within the CTC China's main website with family travel itineraries and travel 4 Quarterly Market Report

5 products. 2. An online survery in August on for icons of Canada, with results contributing to a consumer data base collection. 3. The Perfect Family unveiling in Beijing offered a, lucky draw for one webvisitor in partnership with The lucky winner will have one free trip to BC with the same itienrary as the Perfect Family's 1 st itinerary in BC 4. Shen Xue and Zhao Hong Bo started a trip in Ontario and Alberta from 04 September, their stories are published in their blog on daily basis in 5. The is a change of CTC main website to the following URL: 3 columns will be added - the Canadia Specialist Program, a Blogger and Videos in Canada 6. BC Canada Pavillion is to be shut down from Sep 17, due to limited visitor numbers. The CTC publication of PURE Canada remains over 70,000 copies undistributed. 7. The Perfect Family product brochure of 28 pages has been produced and has start distribution to trade and direct to consumers 8. The Rose Wedding promotion in Shanghai TV, newspapers and shopping malls starts in August in Shanghai; there are 60 travellers who will join the Rose Wedding group to Ontario in October Media 1. Joint E news letter to be sent in the 3 rd week of September in cooperation with the provinces of BC, TA, Ontario and Quebec. 2. The press conference for the Perfect Family unveiling on September 1 st had the participation of 80 journalists and 5 TV stations. A dinner reception followed. Over 50 reports regarding this project have been published prior to 10 th of September, and other 20 reports are to follow at later stage. 3. A Fam tour with 2 journalists themed with the Fraser River and Gold Rush Trail to travelled to BC in cooperation with Tourism BC 4. Media group including a freelancer writer, photographer, print media, website and TV is in Ontario and Alberta for a Perfect Family project. The resulting articles and website reports are to yet be published 5. News Clipping Service is finalized, with tourism partners of BC/Alberta/Ontario/Quebec. Online news clipping reports are available and China 5

6 updated on daily basis. 6. Started the media website translation for the preparation of a Chinese media website 7. Twenty one-to-one inverviews are arranged for CTC, Tourism BC, Travel Alberta and Ontario Tourism in September during the Perfect Family event. Public Relations Competitive Environment 1. The National Tourist Office of Spain will launch an e-learning specialist programe in the overseas markets with different modules catering to specific local market needs. 2. Australia unveils China Tourism Initivatives. Australian Minister for Tourism has reaffirmed the Australian Government's commitment to develop the important Chinese tourism market, Tourism Australia will invest AU$5.7 million throughout to maximise potential growth. Tourism Australia will use television, outdoor, print and online advertising and public relations activities through the Visiting Journalist Program to target China. China is Australia's 5 th largest market in terms of visitor arrivals and 4 th in terms of economic value. 3. Abu Dhabi opens offices in three key cities in China - Beijing, Shanghai and Guangzhou. The United Arab Emirate's national carrier, Etihad Airways, currently operates non-stop services 4 times per week between Beijing and Abu Dhabi 4. Singapore kicks off their 'one city, three festivals' campaign. From the end of August through to November 2008, Singapore will celebrate 3 festivals to illustrate Singapore's rich multi-cultural heritage. Future Outlook 1. Long-haul traffic is likely to be postponed until after the October National holidays 6 Quarterly Market Report

7 2. Combined tour products of the USA and Canada are more welcomed due to the USA now having ADS 3. No present movement on further talks with the Chinese Government on ADS for Canada China 7

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