DFS$Insights$ Predicting*the* Future*Drivers*of* Chinese* International* Travel* Jim$Beighley,$EVP$Strategy$and$Market$ Development$ 1
By$de;inition,$travelers$are$on$the$move$ WHO$vs.$ $WHERE$ ORIGIN$vs.$ DESTINATIO N$ Chinese*in*Tokyo* Japanese*in*Hawaii* Indonesians*in*Singapore* 2
Today$we$invite$you$to$see$the$world$ through$our$eyes $ What$we ll$talk$about$today:$ How$we$use$data$to$drive$ strategy$ Our$Market$Potential$Forecasting$ Model$ How$we$Segment$our$Customers$ Our$Approach$to$Strategy$ What s$next$
Five$Main$Takeaways$ 1. Asian$travelers$will$continue$to$make$markets$all$over$the$world.$$ 2. Predicting$where$travelers$come$from$and$where$they$will$go$is$a$complex$art$ form.$$ 3. Chinese$outbound$travel$is$huge,$and$the$growth$has$only$just$begun.$$$ 4. China$is$more$like$a$CONTINENT$than$a$COUNTRY.$ 5. Travel$retail$will$be$the$growth$engine$of$the$retail$industry$in$the$future$ $so$ get$ready!$$
DFS$is$at$the$intersection$of$$3$industries$ Travel$Retail$ Travel$&$ Tourism$ Luxury$ 5
Travelers$;irst,$Customers$second$ Visa$requirements$ Air$seat$capacity$ Hotel$room$availability$ Currency$exchange$rate$ Distance/length$of$trip$ Demographic$pro;ile$ Psychological$pro;ile$ Group/$FIT$ Spend$capacity$ Communication$channels$ 6
GLOBAL$TOURISM$TRENDS$ 7
UN$WTO:$ Despite$the$ongoing$global$economic$challenges$and$ geopolitical$changes,$international$tourism$results$ were$above$expectations$and$long$term$forecasts. $ Source: UNWTO! 8
Accelerating$Growth$in$Tourism$:$$Driven$by$Asians,$Traveling$ Everywhere$ Source: UNWTO!
The$World$Underestimated$China$ In$2006$the$WTO$famously$predicted$that$Chinese$outbound$ travel$would$reach$the$staggering$number$of$100$million$in$ the$year$2020.$ Actually,$China$will$exceed$that$number$by$2015.$ And$by$2020,$we$believe$there$could$be$200$Million$ outbound$travelers$from$china.$
Chinese$Consumers $Favorite$Past$time$ 40%$ According$to$ McKinsey s$2012$china$consumer$report,$ 40$per$cent$of$those$surveyed$said$ retailgtainment $was$one$of$their$ favourite$leisure$activities.$$ US$102$BILLION$$ Value$of$spending$by$Chinese$travelers$on$international$ tourism$in$2012,$of$which$$ 65%$ was$shoppinggrelated$$ (Source:$UNWTO)$
THE$ART$OF$FORECASTING$$ FUTURE$OPPORTUNITY$ 12
China$too$is$at$the$intersection$of$$3$industries$ Travel$Retail$ Travel$&$ Tourism$ Luxury$ 60%$ Amount$of$Chinese$luxury$goods$spending$ transacted$overseas,$2012$$ (Source:$Bain$&$Co.)$ 13
Forecasting$China s$market$potential$ DFS$set$out$to$understand$how$to$better$forecast$the$Chinese$travel$ phenomenon$ Understand$trends$in$rising$wealth$and$consumer$behavior$across$ China$$ Identify$the$key$indicators$of$outbound$travel$and$luxury$ consumption.$$ Design$a$forecasting$model$to$understand$and$identify$the$most$ important$corridors$of$chinese$outbound$travel$ End$goal:$a$Market$Potential$Index:$!What,!!Where,!When,!!Why!
Bringing$the$pieces$of$the$model$together$ China$Travel$$ Forecasting$Model$ 15
The$4$Step$Framework:$$ Predicting$Market$Potential$and$Behavior$ Where do they come from? And how many are they? China Outbound Tourists Segmented by Province (28) Where are they going? Long-Haul Short-Haul How are they traveling? FIT Conducted FIT Conducted Who are they? And what are they buying? Luxury Consumer Non-luxury Consumer Luxury Consumer Non-luxury Consumer Luxury& Consumer& Non-luxury Consumer Luxury Consumer Non-luxury Consumer 16
Understanding$What$Matters$ Trying$to$unlock$the$relationship$between$outbound$travel$ and$development$inside$china.$ 17
Unlocking$the$Travel$Formula$ Urban!expenditure!is!the!key!driver!of!outbound!travel* In other words: 18
Middle$Class?$Will$Travel!$ Year in which average population of the city becomes middle class *disposable income per capita exceeds RMB30,000 2009 8.2 Million Donguan 2011 56.4 Million Hangzhou Guangzhou Ningbo Suzhou Shenzhen Shanghai 2012 35 Million Beijing Jinan Nanjing Wuxi Xiamen 2013 21.1 Million Baotou Hothot Qingdao Taizhou Tianjin Yantai Population: 235.2 Million Source: DFS GROUP The Economist LIMITED Intelligence Unit + China Bureau of statistics 2014 20.1 million Changsha Dongying Maanshan Wuhan Xi an Yangzhou Zhongshan Zibo 2017 11.8 million Anshan Datong Hengyang Liuzhou Panzhihua Qinhuangdao Xiangfan Zhaozhuang Zhuhai Zunyi 2015 37 million Fuzhou Langfan Harbin Hefei Jining Linyi Nanchang Shenyang Shijiazhuang Tai an Tangshan Weifang Xiangtan Xiangfan Xuzhou Zhengzhou Zhuzhou 2018 14.2 million Changde Guiyan Haikou Huainan Jilin Chaoyang Taiyuan Xingtai Luoyang 2016 27.8 million Anyang Changchun Chengdu Dalian Guilin Huainan Jiaozuo Kunming Luoyang Nanning Pingdingshan Wuhu Zhangjiakou 2019 3.6 million Daqing Huaibei Qiqihar
Where$Will$They$Be$Going?$ How$attractive,$affordable,$ appealing,$safe$are$these$ destinations?$ 20
CHINA$ $CONTINENT$OR$COUNTRY?$ 21
Top and fastest growing origin markets for Europe 2005 Inner Beijing Mongolia Liaoning 2012 Tianjin Jiangsu Shanghai 2018 Zhejiang 22%$ CAGR$2009$g$2013$ Guangdong 22
Top and fastest growing origin markets for Asia 2005 Beijing Tianjin Liaoning 2012 Shandong Hubei Shanghai Zhejiang Fujian 2018 28%$ CAGR$2009$g$2013$ Guangdong 23
Top and fastest growing origin markets for America 2005 Shanxi Beijing Liaoning Shandong 2012 Shanghai 2018 Sichuan Chongqing Zhejiang 37%$ CAGR$2009$g$2013$ Guangdong 24
Why Does This Matter? To$design$marketing$strategies$that:$! Match$the$ corridors $and$! Reach$the$right$people$
THE$ART$OF$KNOWING$OUR$CUSTOMER$ 26
Tracking$the$evolution$of$the$Chinese$traveler$ TRAVEL SHOPPING Adventurous$ Freegspirited$ Exotic$ destinations$ Individualistic$ Authentic$ experiences$ Value$seekers$ Obligations$to$do$ shopping$ favours$ Pregtrip$ planning/$ shopping$lists$ 2004$ 2008$ 2012$ 2015$ Rapid$change$in$ the$demography$ and$experience$ of$chinese$ travelers$ Increased$diversity$ in$needs,$tastes$and$ behaviour$de;ined$ by$province/city$of$ origin$ We$expect$to$see$ increasingly$discerning$ consumers$and$ polarization$of$tastes$and$ experiences$of$travelers$
Diversity in China A tale of three cities Beijing Practical at heart Shenyang Not so adventurous Chengdu Carpe diem Not so brand conscious. Wary of buying fake goods in Beijing. Prefer to form a big tour group of their own and negotiate a customised conducted tour. Not well-traveled, yet. Most go to nearby countries like Korea and Japan. If further away, prefer conducted tour groups. Both men and women from Shenyang interested in going to Korea for cosmetic surgery. Enjoy good food, while traveling. Some travel to visit universities abroad for their children. Enjoy downtown duty free shops. Bored of HK as a destination. Love to visit islands for a change of scenery. 28
TRAVEL$AND$SHOPPING$BEHAVIOURS$OF$ CHINESE$GOING$TO$THE$USA$
Approximately$3%$of$Chinese$ outbound$travelers$visited$the$ USA$in$2013$ Heilongjiang +94.5% Beijing 16.3% Hubei +81.1% Anhui +73.3% 20% Shanghai 16.4% Highest$volume$generating$ provinces$ Highest$growth$provinces$ 31.9% Guangdong 30
San$Francisco$is$the$4th$most$visited$city$$ Most$Chinese$visit$more$than$one$city$on$a$trip.$$ 49.2%$ 34.6%$ 30.8%$ 22.3%$ 18.5%$ They$are$con;ident,$ experienced$and$ more$likely$to$be$ traveling$fit.$they$ want$to$visit$the$us$ because$it$is$different$ to$china,$new$and$ exciting.$ Travel$Reasons$ Leisure$ 58.5%$ Business$ 15.4%$ VFR$ 10%$ Shopping 4.6%$ Other$ 11%$ Top$Motivators$for$visiting$the$US$ Relaxation$ 42.3%$ Natural$scenic$beauty$ 38.5%$ Different$from$home$ 35.4%$ Shopping$ 21.5%$ Culture/History$ 17.7%$
Approximately$64%$of$the$trip$budget$is$allocated$ to$shopping$and$tour$package$ Mean$traveler$spending$in$RMB$21,792$ Travel$ Package$ 34%$ Shopping$ 30%$ F&B$ 12%$ Entertainment$ 10%$ Transportation$ 7%$ And$they$make$60%$of$their$spending$decisions$before$they$leave$ home $ 32
Social$Media$and$Forums$are$powerful$in;luences$on$ shopping$and$other$purchase$decisions$in$the$us$ Perhaps$due$to$language$dif;iculties,$Chinese$are$less$likely$to$utilise$advice$during$the$ trip$and$more$likely$to$conduct$online$searches$in$advance$of$the$trip$to$assess$shopping$ and$other$purchase$decisions.$ 65%$$ of$travelers$$rely$on$ friends/$family/$ worduofumouth$to$ decide$on$where$to$ shop$in$the$us$$ Key$sources$of$inSluence$for$$ shopping$in$the$us$ Travel$websites/blogs/guides$ 60.7%$ Social$Networking$sites$ 56.1%$ Online$discussion/forums$ 40.8%$ 33
Applying$what$we$know:$Shanghai$to$USA$direct!$ Shanghainese$$ Fashion*and*travel* The$most$wellg traveled$fits$$ Why$FIT?$More$time$ for$shopping.$ Like$to$show$their$ individuality$in$their$ out;its.$ Know$where$to$ shop$to$get$the$best$ deals$when$ traveling.$ Budget$for$the$total$ trip$and$for$shopping$ is$lower$than$the$ national$average$ (33%).$$ Allocate$more$ budget$to$f&b$and$ Entertainment$vs.$ national$average.$ Rely$mostly$on:$ Travel$ websites/$ blogs/$ guides$ Online$ travel$ agents$ 53.7%$ 44.4%$ to$make$ shopping$and$ other$purchase$ decisions.$ Top$5$media$ used$by$ Shanghainese:$ Cgtrip$ WeChat$ Tuniu$ Qunar$ Travel.Sina$ 34
Five$Main$Takeaways$ 1. Asian$travelers$will$continue$to$make$markets$all$over$the$world.$$ 2. Predicting$where$travelers$come$from$and$where$they$will$go$is$a$ complex$art$form.$$ 3. Chinese$outbound$travel$is$huge,$and$the$growth$has$only$just$begun.$$$ 4. China$is$more$like$a$CONTINENT$than$a$COUNTRY.$ 5. Travel$retail$will$be$the$growth$engine$of$the$retail$industry$in$the$future$ $are$we$ready?$