CHINA MARKET UPDATE. Building for the Future USA and China Welcoming Tomorrow s Travelers. Michael Merner, Managing-Director, Asia Brand USA

Transcription

1 CHINA MARKET UPDATE Michael Merner, Managing-Director, Asia Brand USA Building for the Future USA and China Welcoming Tomorrow s Travelers 深化务实合作共创美好未来

2 CHINA ECONOMIC UPDATE

3 Historic GDP Growth ECONOMIC SLOWDOWN China s annual GDP growth rate in 2015 was 6.9% Slowest growth in 25 years In line with market expectations as growing services and consumer consumption offset weaker manufacturing and exports January 2016 GDP growth came in at 6.8%, equal to the expectation for the full year

4 Recent GDP Growth SOFT LANDING? Since January 2014, China s GDP has been slowly decreasing, so far avoiding a hard landing of the economy as China s economy moves from export and manufacturing driven to service-based

5 Relative Economic Size In 2010, China s economy surpassed Japan s to become the world s second largest economy In 2011, China s economy equaled just 41% of the size of the U.S. economy today China s economy is 58% of the size of the U.S. economy % growth for China's $10 trillion economy represents a $600 billion increase each year equal to the size of the economy of Saudi Arabia or Argentina being added each year Japan s economy is now a distant third, equivalent to less than half the size of China s economy On a purchasing power parity basis, China now has the world s largest economy USA($Billion) Japan($Billion) China($Billion)

6 China Consumer Spending China Consumer spending is soaring at 9-10% per year: 2011: 22% of GDP 2015: 37% of GDP 2025: 42% of GDP Consumer spending in China in 2015 reached $3.7 trillion and is expected to grow to $6.4 trillion by 2025

7 China s Socioeconomic Transformation SOARING MIDDLE CLASS: 2010: 50 million 2015: 300 million (1/4 of China s population) 2020: 600 million (1/2 of China s population) RAPID URBANIZATION: still represents only 54% of China s population versus the 80% average in developed economies EXPLODING SERVICE SECTOR: grew 8.3% in 2015 and now accounts for 50.5% of GDP CONTINUED RAPID GROWTH IN HOUSEHOLD SPENDING: up 9.2% in 2015 China now has more billionaires than the U.S. Booming middle class

8 Economic Issues to Watch STOCK MARKET CRASH Between June and December 2015, the Shanghai Composite Index lost 31% of its value, more than the entire value of India s exchange Shanghai Composite, The slide continued after the New Year with a further loss of or 22% in January alone The index, however, still remains 30% above 2014 levels. The stock market plays a minimal role in China, accounting for less than 1/3 of GDP versus 100% of the GNP of many Western countries There are 90 million retail investors in China representing only 6.5% of the population invested in the stock market The impact of the stock market crash on outbound travel has been minimal.

9 Economic Issues to Watch USD-RMB, CURRENCY DEPRECIATION PEGGED CURRENCY: the RMB is fundamentally pegged/linked to the US Dollar, limiting its ability to fluctuate ACTUAL FLUCTUATION: since reaching a high in mid-2015, the RMB has depreciated by only 8% versus the U.S. dollar which is a minor adjustment in global terms HISTORIC RATE: today s RMB/USD rate is fundamentally unchanged from 2011 IMPACT ON OUTBOUND TRAVEL: the impact of the RMB/USD exchange rate on travel to the U.S. has been insignificant/non-existent in the minds of Chinese outbound travelers INDUSTRY PERCEPTION: the airlines and travel trade are watching closely but more particularly for the Euro

10 Economic Issues to Watch END OF ONE-CHILD POLICY Since October, it is now legal to have more than 1 child in China Many rural Chinese were already having more than 1 child -- if the 1 st child was a girl, having a second child was allowed and there was limited policing/enforcement compared with urban areas Since 2013, where both parents are single children, such couples were allowed to have more than 1 child but despite estimates than this would generate 2 million births, only 700,000 couples applied for exemptions under the program As a result, the end of China s one-child policy is thought to have a limited impact on China s population growth

11 Size of Adult Population (MILLIONS) 1, CHINA India Brazil Japan Mexico Germany France UK S. Korea Canada Australia

12 China Economic Summary Population (m) 1,347 1,354 1,361 1,368 1,369 Nominal GDP (US$ bn) 7,298 8,447 9,250 10,607 10,407 Real GDP growth (%) 9.3% 7.7% 7.7% 7.4% 6.9% GDP per head (US$ at PPP) 5,414 5,432 6,796 7,754 7,608 Growth in Household Spending 10.3% 9.4% 8.0% 10.8% 9.2% FX Rate (RMB/USD)

13 CHINA OUTBOUND MARKET UPDATE

14 China Outbound Travel Market (MILLIONS)

15 Preferred Leisure Activities of China's Middle & Upper Classes TRAVEL Reading Tea Tasting Family Time Driving Spa Petsitting Wine Tasting Photography Karaoke Fishing Foot Massage Yachting/Sailing Games Cigar Appreciation 15% 13% 11% 9% 8% 8% 8% 4% 4% 2% 1% 28% 23% 39% 56%

16 China Outbound Travel Market Growth Million 6% of China s population Million World s #1 source market Million Double 2010 levels Million 9% of China s population * Estimate 2020* 250 Million 14% annual growth

17 China Overseas Travel Destinations 90% ASIA The U.S. is the only long-haul destination among China s Top-10 destinations 3% AMERICAS 3% EUROPE 3% AFRICA 1% OCEANIA

18 China Outbound Travel Market Funnel 40% of 120 million outbound Chinese trips are just day trips to Hong Kong and Macau Of remaining 67 million overnight trips, 50% are again to Hong Kong and Macau Of the balance, 36 million trips are mid- and long-haul Just 12 million trips are long-haul

19 Total Long-Haul Departures TODAY CHINA Source: Tourism Economics

20 Expected Travel Spend for next U.S. Trip Mean Median $7,566 $6,334 31% 28% 23% 13% 5% Less than $2,499 $2,500-$4,999 $5,000-$7,499 $7,500-$9,999 $10,000+ Question: What is the total amount you expect your household to spend on each of the following elements of this holiday? Enter a whole number without the currency symbol. Airline tickets/lodging/additional trip-related expenses, such as dining, local transportation, souvenirs and local tours Base: China intercontinental travelers (N=975), China travelers who will likely visit the U.S. in their next intercontinental trip (N=513) Source: Brand USA Market Intelligence Study (Conversion CNY to USD=0.162)

21 Chinese Travel Spending Trends SPEND PER TRIP $7,500 spend per person per trip to the U.S. -- makes Chinese the highest spending 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

22 Chinese Overseas Travel Expenditures China RANKS #1 globally in overseas tourism spending at $102 billion, soaring ten-fold since 2000 when China ranked #7 globally Chinese spending soared by 24% to a record $129 billion, widening the gap with the U.S. and Germany (now the 2nd- and 3rdranked global spenders on tourism) by more than $42 billion $164 BILLION, 27% increase, higher than the 2013 increase of 24% Continued to soar an additional 23% 48% of Chinese outbound tourists indicate they plan to increase travel spend China will overtake the U.S. as the #1 BUSINESS travel market in the world, generating 20% of global business travel spend

23 Link between Business & Leisure Travel Percentage of Chinese business trips with a leisure extension 51% 63%

24 CHINESE TRAVEL TO THE U.S.

25 Inverted Travel Pyramid to the U.S. 1.3 BILLION POPULATION Just 12% have the financial capacity for long-haul Just 5% have a Passport of the total population, fewer than 9% are Traveling Outbound of those Traveling Outbound, only 10% are traveling long-haul of which 18% to the U.S Under 0.15% of China s population traveled to the U.S. in 2015

26 % of Chinese Travelers Aspiring to Travel to the U.S. Percentage of intercontinental travelers* who include U.S. on their destination wish list 21% 21% 30% 31% 34% 37% 41% 42% 45% 50% 52% 60% Mexico Russia Japan Canada France India Germany Australia UK Brazil Korea CHINA Source: Brand USA Global Intelligence Program and PhoCusWright, Inc.

27 Likelihood to Visit Next 6 Months (2015 Research) United States 27% Australia France New Zealand United Kingdom 18% 16% 15% 14% Brazil Italy Switzerland Canada 11% 10% 10% 10% Question: When, if ever, are you likely to visit the following countries? Base: China intercontinental travelers (2014 N=1,002, 2015 N=975) Source: Brand USA Market Intelligence Study

28 Chinese Visitors to the U.S. KEY MESSAGE China has soared up the rankings to #4 in terms of overseas visitor number and spending in the U.S. and is projected to rise to become our top overseas source market within 6 years By 2021, Chinese arrivals will exceed Germany, France & Australia combined * Estimate Sources: National Travel and Tourism Office * 2016* 2017* 2018* 2021* Under 200, Million 1.8 Million (+23%) #5 overseas market 2.2 Million (+22%) #4 overseas market 2.5 Million (+17%) 3.0 Million (+16%) 3.4 Million (+15%) #3 overseas market 4.2 Million #2 overseas market 6.3 Million #1 overseas market

29 China-US Airlift Seat Capacity Soaring US carriers China carriers Direct non-stop lift between China and the U.S. has more than quadrupled in the last decade Just under 3.6 million non-stop seats now available direct China to the U.S. Note: Data excludes Hawaii; non-stop flights only

30 New China-U.S. Flights since May 2015 *: pending approval Launch Timing Routes Operating Airline May 2015 Beijing Dallas American Airlines June 2015 Shanghai Seattle Hainan Airlines June 2015 Shanghai Boston Hainan Airlines June 2015 Beijing San Jose Hainan Airlines June 2015 Nanjing Los Angeles China Eastern January 2016 Changsha Los Angeles Hainan Airlines February 2016 Shenzhen Beijing- Los Angeles Air China March 2016 Shanghai San Jose* Air China March-October 2016 Xiamen - San Francisco United Airlines April 2016 Beijing - Boston Hainan Airlines May-September 2016 Xian San Francisco United Airlines June 2016 Xiamen - Shenzhen Seattle* Xiamen Airlines June 2016 Chengdu - Jinan - Los Angeles Sichuan Airlines June-September 2016 Chengdu - San Francisco United Airlines January 2017 Fuzhou New York Xiamen Airlines TBC Chengdu - Las Vegas* Hainan Airlines

31 China Airlift to the U.S. 14 U.S. Non-stop Gateways to China Los Angeles Chicago San Francisco Houston New York Dallas Honolulu Detroit Seattle San Jose Washington D.C. Saipan Boston Guam

32 China Airlift to the U.S. 14 China Non-stop Gateways to the U.S Current Beijing Shanghai Guangzhou Chengdu Wuhan Nanjing Changsha New Xian Jinan Xiamen Fuzhou Shenzhen Hangzhou Shenyang China has 206 airports and is now building another 66 major new airports a 32% increase in number of airports in China in just the coming 5 years

33 Issue to Watch Open Skies Negotiations With a tripling of Chinese arrivals in the coming 5 years, a tripling in airlift is needed between China and the U.S. Already brushing up against the Open Skies ceiling at current traffic levels How to handle a tripling in traffic by 2021? Continued growth in arrivals is impossible without Open Skies Maximum Permitted Round-Trip Flights Per Week: Current Round-Trip Flights Per Week % (148 flights) 82% (128 flights) Capacity

34 PSYCHOLOGY OF CHINESE TRAVELERS TO THE U.S.

35 Chinese Traveler Profile Younger Demographic 87% of Chinese outbound travelers are under 40 Well Educated 67% with a Bachelor s degree and 13% with a Master s 80% are highly educated Exploding Mobile Access 41% acquire destination information from mobile phone versus 29% in 2013 Source: Qyer.com

36 Rapid Shifts in Chinese Style of Travel Rapid increase in repeat travelers to the U.S. (45%) Rapid rise in FIT travelers to the U.S. (40%) Growth of themed tours and in-depth tours focusing on one or two states currently 40% visit just one state Rapidly growing Fly & Drive Rapid growth in beyond-the-gateway travel in the U.S. More frequent but shorter trips to the U.S. becoming more common More Chinese tourists from secondary markets of China More investment in China tourism promotions by airlines, destinations, new partners, and BRAND USA Increase in Corporate/MICE groups given increased visa confidence

37 Motivation for Selecting the U.S. Ecotourism and nature Urban attractions (nightlife, city tours) Cultural/historical attractions Shopping Beaches/seaside attractions Dining/gastronomy Theme parks Local lifestyle Sport and adventure activities Cruise/boating options Special events/concerts/sporting Educational aspects Visiting friends/relatives Religious/spiritual reasons Other (please specify) 0% 7% 9% 12% 18% 18% 23% 42% 46% 69% 65% 64% 61% 60% 60% Question: What motivates your desire to visit the U.S.? Select all that apply. Base: China intercontinental travelers (N=975), China travelers who will likely visit the U.S. in their next intercontinental trip (N=513) Source: Brand USA Market Intelligence Study

38 U.S. Destination Selection Factors 1 (not at all important) 2 3 (moderately important) 4 (important & very important) Satisfying a sense of adventure Increasing my knowledge/understanding of other cultures Keeping fit/engaging in physically active recreation Pursuing personal hobbies/passions (sport, music, cooking) Seeing the world s most unique attractions Resting and relaxation Staying within my comfort zone Connecting with nature Engaging my children in activities that are specialized for them 0% 1% 10% 0% 9% 0% 1% 11% 0% 2% 13% 0% 3% 16% 2% 5% 24% 2% 6% 25% 3% 10% 28% 5% 10% 29% 89% 89% 88% 84% 81% 69% 67% 58% 57% Indulging in upscale/luxury experiences 9% 9% 28% 54%

39 U.S. Destination Selection Features 1 (not at all important) 2 3 (moderately important) 4 (important & very important) Natural features/landscapes (mountains, lakes) Appeal of local culture (food, music, etc.) 1% % 9% 1% % 11% 90% 89% Landmarks and sightseeing options (historical sites, museums) 1% % 14% 84% Reputation/popularity as a travel destination % 2% 15% 82% Leisure attractions (dining, shopping, nightlife) % 2% 17% 81% Ease of travel to the destination (length of flight, # of stops) % 3% 17% 80% Quality of beaches % 3% 16% 81% Activity options (mountain climbing, diving) 2% 8% 26% 64%

40 U.S. Destination Satisfaction The U.S. now tops China s destination satisfaction rankings selected most satisfying foreign destination by Chinese tourists in 2015 Source: China Tourism Academy

41 Net Promoter: United States I would bring it up to recommend as a destination 50% 57% I would tell people positive things about it if it were brought up I would tell people neither positive nor negative things if it were brought up I would tell people negative things about it if it were brought up I would bring it up to discourage people from travelling the there 2% 4% 0% 1% 15% 18% 27% 27% Question: If a friend or relative were discussing a future holiday destination with you, which statement would best describe your attitude toward the following countries? Base: China intercontinental travelers (2014 N=1,002, 2015 N=975) Source: Brand USA Market Intelligence Study

42 Destination Selection Turn-Offs 1 (not discouraging) 2 3 (moderately discouraging) 4 (discouraging & very discouraging) Safety concerns/political instability 6% 10% 13% 71% Crowdedness 6% 11% 28% 56% Lack of visitor resources/support in the destination 7% 15% 26% 51% High prices 5% 14% 30% 51% Visa requirements/entry procedures 8% 18% 30% 44% Inconvenience of travel to the destination (no direct flights) 6% 19% 34% 40% Unfamiliarity with local customs/language 12% 25% 33% 31% Distance from home 28% 30% 22% 20% % of Chinese respondents indicating that the factor is "Important" or "Very Important"

43 U.S. Destination Options in Mind I have the specific place in mind and will not research destination options 17% 19% I had/will have a few places in mind when I start(ed) researching destination options 68% 72% I was/will be very flexible about the destination when researching 15% options % Question: Which of the following statements best describes the circumstances of this holiday? Select one. Base: China intercontinental travelers (2014 N=1,002, 2015 N=975), China travelers who will likely visit the U.S. in their next intercontinental trip (2014 N=539, 2015 N=513) Source: Brand USA Market Intelligence Study

44 U.S. Destination Selection Channels Websites via computer or laptop Personal recommendations from Websites or applications via mobile phone Personal advice from travel Websites or applications via tablet Information in printed travel guidebooks Programmes on TV/radio Printed publications, articles or brochures TV/radio advertising Online advertising/ Calls to airlines Calls/visits to city/state destination Calls to hotels Printed advertising 11% 42% 40% 37% 32% 29% 25% 24% 24% 23% 19% 19% 59% 65% Question: What sources of information did/will you use to select the U.S. for this holiday? Select all that apply. Base: China intercontinental travelers (N=975), China travelers who will likely visit the U.S. in their next intercontinental trip (N=513) Source: Brand USA Market Intelligence Study

45 Online Channels Used for U.S. Destination Selection Online travel agency websites 75% General search engines Travel guide websites Traveller review websites Social networking websites Airline websites Hotel brand websites Destination websites Magazine websites/newspaper websites 58% 54% 48% 44% 43% 42% 30% 20% Question: What type(s) of websites did/will you use? Select all that apply. Base: China intercontinental travelers who used websites or applications in destination selection (N=785), China travelers who will likely visit the U.S. in their next intercontinental trip (N=416) Source: Brand USA Market Intelligence Study

46 Booking Methods Use an online travel agency website Call travel providers directly Use a travel provider website Call/visit a travel agent At the airport/property 22% 20% 11% 14% 17% 14% 15% 10% 8% 11% 11% 18% 13% 13% 15% 22% 15% 15% 6% 8% 23% 19% 10% 20% 21% 17% 13% 1% 0% 4% 1% 1% 0% 3% 1% 1% Question: How did/will you book the travel products for this holiday? Base: China intercontinental travelers who booked /will likely each travel component (N=104~687) Source: Brand USA Market Intelligence Study 32% 37% 39% 44% 46% 49% 56% 59% 60% Air Lodging Car Rental Pre-package or guided tour package Custom package Holiday home rental Cruise Rail Destination activities

47 easons for Using a Particular Booking Method to the U.S. I get better prices It is more convenient I trust these companies I have had good experiences with these I get better customer service I have more options to choose from I receive good advice/recommendations I would receive better support if something I always book this way It was recommended by friends/family 37% 36% 34% 31% 30% 29% 26% 45% 51% 49% Question: Why did/will you book travel to the U.S. this way? Select all that apply. Base: China intercontinental travelers (N=975), China travelers who will likely visit the U.S. in their next intercontinental trip (N=513) Source: Brand USA Market Intelligence Study

48 Destination CHINA ONLINE & SOCIAL MEDIA LANDSCAPE

49 Internet Browsing Frequency Less often than once a month Once a month Several times a month Once a week Several times a week Once a day Several times a day 0% % 0% 1% 1% 1% 0% 1% 3% 3% 9% 7% 87% 88% Question: How often do you typically browse the Internet? Base: China intercontinental travelers (2014 N=1,002, 2015 N=975) Source: Brand USA Market Intelligence Study

50 China Online and Social Media Landscape ONLINE LIFESTYLE 688 million internet users as of December million used smart phones to access the Internet Wechat: 570 million active users, surpassed Weibo for the 1 st time in 2015 Weibo: number of users down 7.1% year-on-year 61% ask for opinions online before a purchase/ destination selection 73% go online to give their opinion on a purchase they made 53% of Chinese will post negative experiences versus 29% in the U.S.

51 Social Network Participation by Chinese Travelers to the U.S Wechat 91% Sina Weibo Qzone 68% 73% Tencent Weibo 43% Pengyou Kaixin 19% 19% Question: In which online social networks do you actively participate? Base: China intercontinental travelers (N=975) Source: Brand USA Market Intelligence Study

52 China Online and Social Media Landscape ONLINE SPENDING IS EXPLODING 2015 online spending reached $672 billion more than double 2013 s online spedn of $307 billion Online spending is forecast to pass the $1 Trillion mark by 2019 Online spending via mobile projected to grow at a 44.2% compound annual growth rate Alibaba, the leading e-commerce conglomerate, saw online sales on its 2015 Singles Day (Nov. 11 TH ) exceed $14 billion in just 24 hours, up 60% over 2014 Alibaba now has 407 million active shoppers, up from 334 million in 2014 who spent $149 billion online, up 23% over 2014 v. just 11% growth for traditional retail sales 1, Online spending ($ billion)

53 China Market Recap: Alignment of Key Factors Market Size: Massive market size of 1.3 billion Market Growth: China's population has grown by the entire population of Australia in 5 years Economic Growth: Second largest economy in the world after the U.S. with willingness to spend on travel soaring Disposable Incomes: Chinese incomes growing at 10% per year FX Rate: RMB pegged to the U.S. dollar Chinese Desire to Travel: Travel is the most desired leisure pursuit for 56% of middle and upper-class Chinese Willingness to Spend: Chinese are the No. 1 spending international visitors to the U.S. with 19% of disposable incomes spent on travel on average China Outbound Travel Growth: 120M outbound in world s # 1 outbound market Potential: less than 9% of China's population is traveling overseas versus 25% for Korea Growth: Number of Chinese outbound travelers is projected to more than double in the next 5 years to 250 million

54 Key Factors Driving Chinese Arrivals to the U.S. Miniscule U.S. Market Share:.15% of China s population and 2% of Chinese travelers to U.S. US Destination Satisfaction: the U.S. tops list of most satisfying destinations for Chinese Positioning: the U.S. has the highest intent to visit of any long-haul destination Streamlined US Visa Interview Process: Under 5 days with 10-year visa now available Growth in Airlift: 35% increase in lift from China to the U.S. in 2015 now with XX China gateways Booming Online and Social Media Channels: 688M online netizens with 594 million via mobile Exploding Secondary Markets: Over 100 cities with populations of over 1 million Booming FIT: with massive growth potential beyond the traditional U.S. gateways Rapid Growth of MICE Market: Perfect China (7,000 pax) Amway (9,000 pax) Huge Growth in Niche Travel: Golf, ski, study abroad, real estate, medical tourism etc. Spend: Per visitor per day already leads all overseas markets Arrivals: #1 overseas market for the U.S. within 5 years U.S. China Year of Tourism 2016: unique opportunity to activate all travel agents nationwide

55 Brand USA in China

56 2015 Brand USA China Pillars Four teams in Beijing (North), Shanghai (East), Guangzhou (South), Chengdu (West) Extend Brand USA marketing programs into Secondary Markets throughout China Educate Travel Trade Nationwide and secure development of new U.S. tour product beyond the traditional U.S. gateways Secure launch of new airlift/new gateways/new airline partners Co-op with Chinese travel trade & airline partners to secure increased investment in U.S. travel promotions Promote U.S. China Tourism Year nationwide Target both Leisure & MICE markets Rapidly boost earned media coverage/visibility nationwide Extend brand advertising campaign Leverage booming Online & Social Media channels Generate China Co-op investment opportunities for partners Offer new China Market-Entry Platform for U.S. Partners

57 Brand USA China Team MICHAEL D. MERNER Managing-Director, Asia YOICHI HAYASE Asia Strategy Director JEROME LEROUX Communications Director, Asia TINA YAO Shanghai Office Director CHARLIE LI China Director VINCENT TANG Travel Trade Marketing Manager Chengdu Office ISAAC WANG Guangzhou Office Director SPRING ZHENG Travel Trade Marketing Director BENNY SUN Travel Trade Marketing Manager PHOEBE WANG Public Relations & Co-op Manager ANITA JIA Public Relations & Co-op Director SUNDAY WANG Public Relations & Co-op Manager

58 Xie Xie! Thank You!