THE CHINESE OUTBOUND TRAVELER

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1 THE CHINESE OUTBOUND TRAVELER HICAP UPDATE 16 March 2016 Presentation by: Amrita Banta Managing Director Agility Research and Strategy

2 2 The Chinese Outbound Traveler

Why Focus on the Chinese Outbound Traveler? Despite slowing growth the market has witnessed a continuing surge in affluence levels, and is forecasted to continue its growth in outbound travel.

3 Why Focus on the Chinese Outbound Traveler? Despite slowing growth the market has witnessed a continuing surge in affluence levels, and is forecasted to continue its growth in outbound travel. According to China Tourism Research Institute, China had 120 million outbound visitors in 2015 (up 12% from 2014) and they spent USD billion (up 17% from 2014). With many countries trying to attract Chinese tourists there are now about 47 markets with visa free or visa on arrival policies for Chinese tourists. 3

4 Chinese consumers are the most optimistic in the region about having more money to spend in 2016, compared to I Will Have More Disposable Income 1% 4% 21% 51% 24% Completely Disagree Somewhat Disagree Neutral Somewhat Agree Completely Agree Source: Agility Affluent Insights Q: Looking ahead to 2016, and comparing it to 2015, please rate how strongly you agree with each of the following statements Base: All respondents, n=454 4

5 China also still shows the biggest potential for travel growth in the region, with the wide majority still looking to increase the amount of leisure travel in I Will Travel More for Leisure 2% 2% 16% 50% 32% Completely Disagree Somewhat Disagree Neutral Somewhat Agree Completely Agree Source: Agility Affluent Insights Q: Looking ahead to 2016, and comparing it to 2015, please rate how strongly you agree with each of the following statements Base: All respondents, n=454 5

6 What are they saving up for? While in China there is still demand for luxury items, such as, watches, jewellery and bags, travel is one of the top categories for the next big purchase the affluent Chinese are planning. Source: Agility Affluent Insights 2015 Q: What is the most interesting luxury or big ticket purchase that you are hoping or dreaming to buy next? Base: All respondents, China n=380 6

and travel represents a notable portion of total spend (25%), with the Chinese consumer

Share of Wallet Total Jewellery 6% 6% 7% 6% 1% 16% 14% Designer clothing Hotel

Alcohol Make-up Designer accessories Skincare products Cruise tickets SOURCE: Agility

7 and travel represents a notable portion of total spend (25%), with the Chinese consumer on average spending slightly more on hotel accommodations than airline tickets. Share of Wallet Total Jewellery 6% 6% 7% 6% 1% 16% 14% Designer clothing Hotel accommodation Airline tickets Premium/luxury watches 8% Tablet or smartphone 11% 12% 13% Alcohol Make-up Designer accessories Skincare products Cruise tickets SOURCE: Agility Affluent Insights How much do you spend on average in the following categories on a monthly level? BASE: China n=380 7

8 WHERE ARE THEY TRAVELLING AND WHAT ARE THEY LOOKING FOR? 8

Top Past Travel Destinations start with regional destinations,

Taipei SOURCE: Agility Affluent Insights Which of the following

9 Top Past Travel Destinations start with regional destinations, and major tourism cities, such as Paris, New York, Sydney, LA and London have already been explored. Top 1 Top 2 Top 3 Top 4 Top 5 Hong Kong Seoul Tokyo Singapore Taipei SOURCE: Agility Affluent Insights Which of the following HOLIDAY DESTINATIONS have you travelled to in the past twelve months? Base: n=380 Top 6 Top 7 Top 8 Top 9 Top 10 Top 11 Top 12 Top 13 Top 14 Top 15 Bangkok Paris Osaka New York City Sydney Phuket Nagoya Los Angeles London Bali 9

Top Planned Travel Destinations include more exotic

Top 1 Top 2 Top 3 Top 4 Top 5 Hawaii Hong Kong

Which of the following HOLIDAY DESTINATIONS are

Base: n=380 10 Top 6 Top 7 Top 8 Top 9 Top 10 Top

10 Top Planned Travel Destinations include more exotic destination. Top 1 Top 2 Top 3 Top 4 Top 5 Hawaii Hong Kong Tokyo Paris Dubai SOURCE: Agility Affluent Insights Which of the following HOLIDAY DESTINATIONS are planning on visiting in the next twelve months? Base: n= Top 6 Top 7 Top 8 Top 9 Top 10 Top 11 Top 12 Top 13 Top 14 Top 15 Sydney London Maldives Osaka Seoul Taipei Bali Singapore Phuket Los Angeles

Travel preferences show local foods and culture are major attractions for

in local culture when traveling 46% I prefer packaged tours Source:

11 Travel preferences show local foods and culture are major attractions for international travelers, and customized tours are generally preferred over packaged options. 86% I want to experience local foods when traveling 84% I want to immerse in local culture when traveling 46% I prefer packaged tours Source: Agility Affluent Insights 2015 Q: Please rate how strongly you agree with each of the following statements.- Top 2 Box; Base: n=380 11

12 What hotel brands resonate with them? 12

13 Top Hotel Brands Stayed with in the Past Year include Holiday Inn, Marriott, and Hilton Top 1 Top 2 Top 3 Top 4 Top 5 Top 6 Top 7 Top 8 Top 9 Top 10 Holiday Inn Marriott Hilton Shangri-La Intercontinental Crown Sheraton Hyatt Four Points Grand Hyatt SOURCE: Agility Affluent Insights HOTELBRANDS - Which of the following HOTEL brands have you stayed with the last twelve months, and are planning on staying with the next twelve months? Base: n=380 13

14 for Top Hotel Brands for Planned Visits Ritz-Carlton and Sofitel make it to the top 10. Top 1 Top 2 Top 3 Top 4 Top 5 Top 6 Top 7 Top 8 Top 9 Top 10 Hilton Shangri-La Holiday Inn Marriott Sheraton Intercontinental Crown Hyatt Ritz-Carlton Sofitel SOURCE: Agility Affluent Insights HOTELBRANDS - Which of the following HOTEL brands have you stayed with the last twelve months, and are planning on staying with the next twelve months? Base: n=380 14

15 What other dynamics can we see for hotel brands? Affluent Insights 2015 Luxury Brand Future Index for hotels indicates that for Chinese travelers there is preference to increase visits to Shangri-La hotels in the next 12 months, while slightly fewer expect to visit a Marriott. Source: Agility Affluent Insights 2015 CN (Top- 20 Brands by Past Visits) Past Visit Index (1-20) Future Visit Index (1-20) Luxury Brand Future Index (0-200) Holiday Inn Hilton Marriott Shangri- La Intercontinental Crown Sheraton Hyatt Four Points (by Sherat Grand Hyatt Westin Hyatt Zilara Peninsula Ritz- Carlton Hyatt Ziva Marina Bay Sands Park Hyatt Hyatt Regency Sofitel Le Meridian

16 What are their motivations and attitudes about luxury? 16

Is luxury part of travel? Agree with I will Travel more luxuriously India (n=374) China (n=380) 76% 73% Chinese and Indian travelers are likely to opt for more luxurious travel options.

17 Is luxury part of travel? Agree with I will Travel more luxuriously India (n=374) China (n=380) 76% 73% Chinese and Indian travelers are likely to opt for more luxurious travel options. HK (n=356) Malaysia (n=361) SG (n=368) Taiwan (n=352) S.Korea (n=380) Japan (n=361) 51% 47% 46% 41% 41% 37% Source: Agility Affluent Insights 2015 Q: Looking ahead to the next 12 months, and comparing it to the previous 12 months, please rate how strongly you agree with each of the following statements.-top-2-box Base: All respondents 17

Source: Agility Affluent Insights 2015 Q: Which class of service do you most often purchase airline

18 Class of Service for Air Travel 11% 23% 22% 45% First Business Premium Economy Economy/Tourist is more likely to be business or first for Chinese travelers than for other travelers in the region. Source: Agility Affluent Insights 2015 Q: Which class of service do you most often purchase airline tickets for when you are paying for them yourself? Base Last 12/next 12-month air ticket purchasers base: n=357 18

19 How do they define luxury? Price and quality are the makings of a luxury product for the Chinese consumer. Luxury is expressed in one s taste in unique products, that elevate your status. SOURCE: Agility Affluent Insights Research 2015 Q: What does luxury mean to you? BASE: China n=319 19

20 What do they expect from a luxury experience? Service is at the centre of a perfect luxury experience. Besides being high-class, and having high quality in all its elements, the experience needs to be unique. SOURCE: Agility Affluent Insights Research 2015 Q: How would you define the Perfect Luxury Experience? BASE: China n=319 20

almost 3 in 5 are comfortable also ordering the products online from other countries.

21 How are they shopping for luxury? 2 in 3 say that they mainly buy luxury products when traveling. Mainly buy luxury when traveling 66% Online is perhaps competing with travel shopping, as 3 in 4 research luxury purchases online, and almost 3 in 5 are comfortable also ordering the products online from other countries. Research luxury products online Purchase luxury products online from outside my country 56% 75% SOURCE: Agility Affluent Insights Research 2015, Please rate how strongly you agree with each of the following statements. BASE: China n=380 21

What drives their travel luxury shopping? Better pricing and lack of selection in their home cities is driving the Chinese to shop luxury products when traveling.

22 What drives their travel luxury shopping? Better pricing and lack of selection in their home cities is driving the Chinese to shop luxury products when traveling. Preference for travel luxury shopping is influencing their destination choices. It is important for me to get the best possible price when buying luxury brands I mainly buy luxury brands when I can get them tax free I buy luxury items outside my home city because of better selection offered I prefer travel destinations where I can buy luxury products 66% 67% 68% 73% SOURCE: Agility Affluent Insights Research 2014, Please rate how strongly you agree with each of the following statements. BASE: China n=380 22

23 How much do they travel and how do they book it? 23

24 Number of international trips taken in the past 12 months averages around 2.3 for both leisure and business trips, although almost one third had no business trips. Average Trips For Leisure 11% 26% 33% 21% 7% 1% 2.3 For Business 31% 17% 22% 14% 12% 3% to 4 5 to Source: Agility Affluent Insights 2015 Q: How many international trips have you taken in the past 12 months for the following purposes? Base: n=380 24

Number of leisure trips taken by age overall reveals the youngest generations, those under 40, as the most frequent leisure travelers, averaging one trip a year more than their older counterparts.

25 Number of leisure trips taken by age overall reveals the youngest generations, those under 40, as the most frequent leisure travelers, averaging one trip a year more than their older counterparts. Average Trips Years (n=92) Years (n=129) Years (n=79) Years (n=42) Years (n=38) 1.41 Source: Agility Affluent Insights 2015 Q: How many international trips have you taken in the past 12 months for the following purposes? Base: n=380 25

Travel bookings are done online by 4 out of 5, but still over half prefer to use travel agents. The majority like to book different components of their trip separately.

26 Travel bookings are done online by 4 out of 5, but still over half prefer to use travel agents. The majority like to book different components of their trip separately. 82% I book travel online 55% I prefer to use a travel agent for my bookings 71% I prefer to book different components (air/hotel/car) separately Source: Agility Affluent Insights 2015 Q: Please rate how strongly you agree with each of the following statements.- Top 2 Box Agree; Base: n=380 26

27 HOW DO YOU CATCH THE ATTENTION OF THE AFFLUENT CHINESE TRAVEL PLANNER? 27

28 Where do they pay attention to AIR TRAVEL ads and info? Online is the best way to reach Chinese with air travel ads. They also pay attention to air travel advertising at airports. Top 1 Top 2 Top 3 Top 4 Top 5 Top 6 Top 7 Top 8 Top 9 Top 10 Online search Brand website Websites specific to the category Website ads Airport Recommendation from friends or family Mobile apps (including messaging apps) ed subscriptions Television Social media SOURCE: Agility Affluent Insights 2015 In which of the following places, venues, or media would you be likely to pay attention to any information or advertising of products in the following categories? Base: n=380 28

29 Where do they pay attention to HOTEL ads and info? Websites and recommendations are where Chinese find ads and get information on hotels. However, print magazines are also effective. Top 1 Top 2 Top 3 Top 4 Top 5 Top 6 Top 7 Top 8 Top 9 Top 10 Online search Brand website Websites specific to the category Recommendation from friends or family Magazines (printed) Website ads Write-ups on blogs, forums, review sites Mobile apps (including messaging apps) Social media Airport SOURCE: Agility Affluent Insights 2015 In which of the following places, venues, or media would you be likely to pay attention to any information or advertising of products in the following categories? Base: n=380 29

30 How digital sources influence booking? Consumers go online to research their travel options. Travel review sites are very influential information sources, but social media and online videos are used more widely. 88% I research travel options online 73% Social media is important for me when researching travel 66% I rely on travel review sites when booking 73% Online videos are important for me when researching travel Source: Agility Affluent Insights 2015 Q: Please rate how strongly you agree with each of the following statements.- Top 2 Box; Base: n=380 30

31 31 What can I take away from this?

The next big purchase is often TRAVEL! The next big ticket purchase consumers are looking to make in markets like HK, Taiwan, and China often revolve around travel.

18 to 35 year-olds who are Aspirational, Ambitious and Affluent lead the travel charge in many markets across Asia and especially China.

32 The next big purchase is often TRAVEL! The next big ticket purchase consumers are looking to make in markets like HK, Taiwan, and China often revolve around travel. The travel destinations are changing with time. Generation AAA dominates the travel market! 18 to 35 year-olds who are Aspirational, Ambitious and Affluent lead the travel charge in many markets across Asia and especially China. Internet is the dominant information source. LUXURY is becoming an integral part of travel! The newly affluent in China own luxury products and have already made trips to destinations near and far. Now, they are looking to incorporate their taste of luxury into their travel experiences. 32

The internet plays a bigger role in travel

many other nationalities How do they plan

They rely on online search when they are

booking websites They talk to their friends

33 The internet plays a bigger role in travel planning for the Chinese consumers than for many other nationalities How do they plan their travel? They rely on online search when they are planning a trip They visit travel review and booking websites They talk to their friends and rely on their recommendations Social networks are increasingly influential in their decision 33

34 Key Takeaways ü Travel is a major spending category for consumers in China ü Chinese travelers are looking to travel more luxuriously and upgrade their travel choices ü Besides the internet, recommendations and print magazines are important information sources for hotels ü Online and now mobile is being used not only for research but also for booking travel especially in China and India. ü The Chinese traveler is young/ digitally savvy and looking for a unique experience 34

35 Will consumers continue to travel in 2016? We can expect leisure travel to continue growing at a fast pace across most of Asia, and especially among the Chinese. Few in any market expect to travel less, with the exception of Japan and Malaysia, and also HK. WILL DO MORE LEISURE TRAVELS Do not agree at all Somewhat disagree Neutral Somewhat agree Completely agree CHINA CHINA 0% 2% 16% 50% 32% INDIA 4% 6% 23% 41% 26% INDONESIA 4% 6% 30% 41% 19% THAILAND 0% 12% 21% 47% 19% VIETNAM 3% 8% 26% 44% 19% PHILIPPINES 5% 7% 34% 37% 18% SINGAPORE 3% 11% 32% 38% 16% KOREA 5% 12% 31% 42% 10% HONG KONG 1% 7% 45% 37% 10% TAIWAN 2% 9% 39% 42% 9% JAPAN 10% 7% 50% 25% 9% MALAYSIA 9% 16% 39% 29% 9% Source: Agility Affluent Insights Q: Looking ahead to 2016, and comparing it to 2015, please rate how strongly you agree with each of the following statements Base: All respondents, n=2,402 35

Office HONG KONG Unit 1101, 11/F, Caroline Centre, Lee Garden Two, 28 Yun Ping Road,

36 We look forward to working with you! Regional HQ SINGAPORE 300 Beach Road, #14-07, The Concourse Singapore Hong Kong Office HONG KONG Unit 1101, 11/F, Caroline Centre, Lee Garden Two, 28 Yun Ping Road, Causeway Bay, Hong Kong Contacts Amrita Banta - Managing Director amrita@agility-research.com Ali Mirza - CEO ali@affluential.com

Past Events

Past Events 2006 2012 November, 2012 Thursday, 15th November 2012 KPMG Office, Seoul South Korea Wednesday, 7th November 2012 Hotel Mulia Senayan, Jakarta Indonesia Tuesday, 6th November 2012 Mandarin