Visit California China Office Monthly Activity Report

u Visit California China Office Monthly Activity Report May 2014 Prepared by AVIAREPS Marketing Garden China I. INDUSTRY UPDATE Economy The preliminary Purchasing Managers Index for Chinese manufacturing in May beat expectations by posting a five-month high based on a rebound in output and orders. The PMI was 49.7, compared with a 48.3 median estimate from analysts. The new order sub-index rose to 50.2 from 47.4 in April, the highest reading so far this year. The new export order sub-index rose to 52.7, compared with 48.9 in April. The Ministry of Commerce (MOC) said that Foreign Direct Investment (FDI) into the Chinese mainland rose 3.4% year-on-year to $8.7 billion in the first four months of 2014. China drew $40.3 billion in FDI, an increase of 5% from a year earlier. The National Bureau of Statistics reported that China's industrial added-value in April rose 8.7% year-on-year; it also increased 0.82% from the previous month. The Chinese currency renminbi, or the yuan, strengthened 23 basis points to 6.1542 against the U.S. dollar on May 21, according to the China Foreign Exchange Trading System. Outbound Travel Market A World Tourism Organization market update issued in May reports China, Russia and Brazil account for half the world s increase in tourism expenditure. In 2013, these three source markets accounted for some US$40 billion of the total US$81 billion increase in international tourism expenditure. China, which became the largest outbound market in 2012 with an expenditure of US$102 billion, saw an increase of 26% in spending last year to a total of US$129 billion. 1

China Daily reported China is Los Angeles biggest overseas tourism market as the U.S. city's Tourism and Convention Board announced its NiHao China marketing push. The campaign, a strategy to enhance the experience of Chinese tourists and attract more to the city, aims to build on the 570,000 visitors (up 21%) in 2013. European tourism experts told a conference in Spain that successfully attracting Chinese tourists was not just a matter of crossing the language barrier, but also of thinking about culture and customs. The Chinese Friendly Cities tourism conference in Zaragoza was advised "we have to become more Chinese in our thinking" to tap the Chinese tourism market. Zaragoza recently became a "Chinese-friendly" city, joining the growing list of destinations adapting to cater more specifically to Chinese visitors. Spain reported a 30% rise in the number of Chinese visitors in 2013 Competitive Environment China's new travel law benefits New Zealand's tourism industry, according to the peak Kiwi tourism body. The number of visitors to NZ rose 6.1% in the year to the end of April, hitting 2.78 million, with a marked increase in the "quality" of tourists from China. Visitor arrivals from China were down 1.4% for the month, but were up 10.4% for the year ended April. Growth has slowed but there's a "significant increase in the quality of arrivals" from China. "Stay days" were up 26.8% in the seven months since implementation of the China Travel Law (October 2013), generating an additional 199,072 "stay days" from Chinese visitors. The China Travel Law requires travel agents in China to offer better quality group tour packages. Sri Lanka tourism crossed the half-million mark in April, boosted by a 136% rise in Chinese arrivals. Tourist arrivals in April grew by 39.5% to 112,631 compared to the same month last year, making the first four months' total 534,132, an increase of 27.6% over 2013. China, the new star, produced 36,803 arrivals up to April, a growth of 136%; in April the number of Chinese tourists rose by 170% to 8,005. Only 27,627 Chinese tourists arrived in Sri Lanka in 2012. China has become Sri Lanka's third largest source of tourists (behind India and the UK) and its fastest growing market. Consumer Trends Travelzoo Inc. announced that its annual subscriber survey findings show the Asian travel appetite in 2014 will get stronger, with a forecasted increase of 17% in travel budgets over last 2

year's. The study revealed that Mainland Chinese will continue to lead the region in travel frequency, taking an average of 6.5 leisure trips per capita and spending an estimated US$8,200 (avg.) in 2014. They are followed by: Japanese with 5 leisure trips and an average spend of US$4,800; Taiwanese with 4.4 leisure trips and an average spend of US$6,170; and Hong Kong travelers with 4.3 leisure trips and an average spend of US$6,900. Australians will travel the least, with an average 3.5 leisure trips in 2014. However, they spend the most on vacations at an average of US$9,340. Media Trends The 2014 China Internet Development Report noted mobile internet is becoming a lucrative business in China, driven by improving telecom infrastructures. Total revenue in the mobile internet sector reached 108.3 billion yuan (US$17.8 billion) in 2013. China internet giant Tencent Holdings has emerged as the world's fastest-growing brand this year, surpassing China Mobile as the most valuable in Asia, according to the latest BrandZ Global Top 100 study. Travel Trends A World Tourism Organization forecast anticipates the number of hotel rooms in China will reach 6.1 million by 2025, exceeding the U.S. to become the largest hospitality market in the world. As Chinese outbound travel is still growing rapidly, China will also become a catalyst for growth in the global hotel market, the WTO said. International hotel industry players were updated on trends affecting their mutual target group - the travelling Chinese - at the 48th Berlin International Tourism Fair (ITB). The existence of the "typical" Chinese outbound tourist was questioned given that rising self-organized Chinese travelers already account for about a third of the market. Also highlighted was the changing shopping habits of Chinese, from brand to lifestyle and from sightseeing to experience, that breaks "outdated" images of Chinese outbound markets. And the three key points recommended for noting about China's second wave of tourists are locations, hotel features and social media. Airlift China Southern Airlines will launch the first direct air route between Germany and central China's Hunan Province. The service, which will link Frankfurt, Hunan's provincial capital 3

Changsha and the southern city of Guangzhou, will begin on June 23 with three round-trip Airbus A330-200 flights a week on Monday, Wednesday and Friday. Qatar Airways has announced an online application service for Chinese tourists seeking an entry visa to the UAE state. Chinese travelers can apply online for a month-long single entry permit. Hong Kong Airlines held a strategic cooperation signing ceremony in Hong Kong with China's leading online travel service provider Ctrip to launch a business class fare promotion. The long-term business class marketing strategy includes business fares offered on Ctrip.com through to February for as low as 2,850 yuan (round trip between Shanghai and Taipei). Air France unveiled its new first-class cabin in Shanghai, fuelling an international luxury-seating race to win over Asia's rising number of high fliers. The airline's "haute couture" suite will feature a seat that reclines into a bed stretching 2.01m x 77cm wide, one of the world's most spacious. II. ACTIVITY UPDATE A. Travel Trade Marketing A-1. Major Sales Calls Visit California Shanghai made a sales call to Shanghai Ukubang Network Technology Company (May 7) to meet social media operations director Ms. Janne Zhu. Visit California asked Ukubang to submit a proposal to create and operate Visit California's official WeChat platform. WeChat has become the most popular social media tool in China and can be ideal to distribute Visit California information. Ukubang is an experienced network technology company and VCA Shanghai team will pursue development of the proposal. Visit California Shanghai met Galaxy Tours marketing director Ms. Elena Wang (May 8) to discuss its proposal to VC to co-invest in its 2014-15 brochure. The publication (initial print run 5,000) will be distributed to the U.S. teams of over 300 tour operators. Galaxy is offering one to two exclusive color pages for California products as well as putting the VCA logo on the cover. The agent is also offering VC the banner on its website and to use its WeChat to distribute VC information. As a part of the campaign, Visit California Shanghai proposed Galaxy create and sell one California-only itinerary. Ms. Wang will report our requirements to her management and VCA Shanghai will do follow up. 4

Visit California called JW Marriott Shanghai hotel's sales director Ms. Calin Shan (May 16) for the October California China Mission hotel proposal. VC did a site inspection of the function venues and guest rooms on May 20. Visit California made a sales call to Jinjiang Travel (May 20) to meet America section vice-manager Ms. Vicky Qiang. We signed a Joint Promotion Contract to co-invest in targeting social media. The deal includes newspaper advertising, cruise in-house video advertising, flyers, EDM advertising and a Jinjiang website banner. Visit California Team will follow up the implementation. Visit California called Ritz-Carlton Shanghai Pudong hotel's sales manager Ms. Lorraine Wang (May 22) for the October California China Mission hotel proposal. VC did a site inspection of the function venues and guest rooms on May 26. Visit California has made sales call to Spring Tours (May 23) to meet America team product manager Mr. David Yu. We signed a Joint Promotion Contract to co-invest in targeting social media. The deal includes newspaper and WeChat advertising, offline training, flyers, EDM advertising and a Spring Tours website banner. Visit California Team will follow up the implementation. Visit California called Mandarin Oriental Pudong Shanghai hotel's senior sales manager Ms. Judy Zhu (May 26) for the October California China Mission hotel proposal. VC did a site inspection of the function venues and guest rooms on May 27. A-2. Marketing Activities ************************************************************************** B.VC Beijing Office B-1. Hotels and Airlines Collaboration between VC China and United Airlines on the non-stop Chengdu-San Francisco air service continued throughout May and the main activities were as follows: Chengdu Travel Trade Reception 5

United Airlines hosted a Travel Trade Reception at Ritz Carlton Chengdu (May 8) to celebrate the inaugural Chengdu to San Francisco flight. As industry strategy partner, Visit California shared part of the full cost and attended the event. VC used the opportunity to liaise with Chengdu travel trade and local tour operators on their California-related product designs and delivered destination information. VC Beijing thanked tour operators for their continuing support of California tourism and encouraged more product development for Chengdu market. Chengdu IFS Showcase United Airlines and Visit California co-hosted a showcase of California scenes and UA products and services at Chengdu International Financial Square. The display also included a UA Dreamliner First Class seat, a California interactive photo booth and California Dream hero images. Visitors could interact with the digital bear on screen and take photos with him in different poses. California specialty products were also displayed. The showcase will be open May 20 to June 8 and is expected to attract 40,000 Chengdu visitors, increasing the profile of United Airlines and destination California. 6

Chengdu Travel Trade Lunch Meeting Visit California hosted a lunch meeting with Chengdu key tour operators and travel agencies (May 8) in appreciation of their support for California tourism and to build relationships. U.S. Chengdu Consulate's commercial representative Helen Hua officially introduced Visit California Beijing to participants. VC Beijing director Cynthia Zhou explained Visit California China's mission and highlighted the key points of California tourism resources. VC Beijing office travel trade manager Kevin He outlined how Visit California could assist the Chengdu travel trade and encouraged them to develop and launch more California-dominated products. VC Beijing will continue this kind of Chengdu travel trade communication with meetings and/or visits once a quarter as the new direct flights open to San Francisco. Chengdu is considered to be the China outbound market's 4th gateway city to the U.S. 7

Chengdu Overseas International Travel Trade Seminar Visit California Beijing organized a seminar (May 16) to deliver training about California and United Airlines' products to about 160 of Chengdu Overseas International Travel's agency dealers, vendors and associated companies. Chengdu Overseas International is one of the leading tour operators in Chengdu market and is also a participant in the California UA Chengdu co-op program. The training included a California destination presentation and 100 sponsored giveaways. B-2, Major Sales Calls 8

VC Beijing visited Caissa International Beijing for talks with marketing director Ms. Ge Mu about the Chengdu branch's involvement in the California UA co-op project. Discussions included suggested amendments to the media buy plan which needs to be submitted late June. VC Beijing agreed to support Caissa's promotion of California products in Chengdu and Beijing with giveaways and pop-up banner displays. VC Beijing continued to support the Perfect China visit, holding a meeting with CITS MICE (May 8) to discuss the media group itinerary and media reception to be held May 27. At the agent's request, VC also coordinated the media group's visa interviews with US Consulate Beijing. The 7,000 pax Perfect China group was accompanied by a 25-strong media contingent to cover the mega group's activities and bring their best California stories back to Chinese people. VC Beijing escorted the group to make sure everything was smooth and successful. VC Beijing had a meeting with Universal Studio Hollywood's trade manager Chloe Zhu to swap market intelligence. VC Beijing thanked Ms. Zhu for USH's on-going support and would like to continue the cooperation. Universal's is one of the most popular theme parks in California and is a 'must visit' for Chinese tourists. VC China will cooperate with USH to generate more future MICE business opportunities. The meeting further discussed 2015 Chinese New Year promotion and how to bring more Chinese travelers to Universal. VC China also introduced Ms. Zhu to industry partner possibilities with Dollar and Premium Outlets for package product design and launch. VC Beijing had a meeting with Travel Channel marketing manager Zhao Qian about its Toyota self-drive project along Highway No. 1 as part of its Big Dream co-op with Visit California. Travel Channel shared the group itinerary with VC Beijing to get travel trade advice. VC Beijing gave suggestions for a revised itinerary for Travel Channel to discuss with the land operators. VC Beijing also provided POVs about 'must visit' places on the highway and on the central coast to enhance participants' experiences of California to be conveyed to Chinese audiences. C. Public Relations C-1. Media Monitoring (clippings and publicity calendar) Visit California China office secured 29 items of PR coverage during April with an estimated total circulation of 8,171,000 and estimated advertising value of US$2,966,001 9

C-2. Press Release Distribution Visit California China office distributed two press releases (below) to key media representatives in China, and followed up to ensure coverage. Largest Chinese MICE Group Coming to Orange County, CA California Tourism Industry Declares Support for CITS MICE C-3. China E-Newsletter Visit California China office secured 21 items of PR coverage during May with an estimated total circulation of 6,023,000 and estimated advertising value of US$720,635 C-2. Press Release Distribution Visit California China office distributed two press releases (below) to key media representatives in China, and followed up to ensure coverage. Almost Famous: Ten California Chefs To Watch California in Song: Tuning in to the Golden State C-3. China E-Newsletter Visit California China s May E-Newsletter contained the following content specially prepared for Chinese media. California Ultimate Playground For Families What s New In California - Summer of Fun C-4. Media Liaison 10

Visit California China office made 18 press calls to the following major travel trade, daily newspapers, magazine and portal sites to pitch for California features: 1. Mr. Yu Kai, Editor, Oriental Morning Post 2. Ms. Rachel Chen, Editor, Feeling 3. Ms. Rica Lou, Creative Director, Restaurant Review 4. Mr. Luo Ke Ping, Chief Editor, Airport Journal 5. Mr. William Zhang, Chief Editor, Business & Travel Golf 6. Ms. Yao Dong Mei, Senior Editor, Xinmin Evening News 7. Ms. Mo Jiao, Feature Editor, Target 8. Ms. Cindy Wang, Vice General Manager, All Sports 9. Ms. Wang Xiao Bo, Senior Editor, National Geographic 10. Ms. Annie Li, General Manager, imerom DM 11. Ms. Qu Fei, Editor and Host, CNR 12. Mr. Leo Wei, Publisher, Traveler Weekly 13. Ms. Jane Huang, Editor-in-Chief, Traveler Weekly 14. Ms. Phillis Yu, Editor, Sohu.com 15. Ms. Pan Lei, Feature Editor, National Geographic Traveler 16. Mr. Cai Yumin, Deputy Editor-in-Chief, Global Times 17. Ms. Wang Ying, Editor, Global Times 18. Mr. Leng Bing, Editor-in-Chief, Can Kao Xiao Xi C-5. Media Call Highlights Media: National Geographic Circulation: 360,000 Profile: one of the most popular and best quality magazines circulating to experienced and sophisticated international travellers. Topics: Travel in San Francisco Bay Area, California Follow up: National Geographic will publish an exclusive San Francisco Bay Area feature in April to introduce its travel resources including scenery, shopping, wine and food, and local culture to Chinese travellers. Media: Profile: CNR China National Radio is the most influential and only radio service broadcast 11

Topics: Results: nationwide in China. CNR currently has 10 channels which broadcast 198 hours of programming through satellite. California a California-themed program broadcast on June 3 featured Stephanie introducing destination travel resources, including theme parks, beaches, wine and shopping. Media: Traveler Weekly Circulation: 250,000 Profile: Traveler Weekly is the most influential travel newspaper in China. Targeting city elite, it includes the hottest travel destination information (sightseeing, travel tips, shopping guide, cuisine, hotels, etc.), life style news, and travel guides. Topics: California: The Land of Dreams Results: Traveler Weekly is planning a special California feature after returning from the Perfect China media Fam. Email interviews will be done for stories featuring Universal Studios Hollywood, Disneyland Resort, Beverly Hills, South Coast Plaza and Simon Shopping Destinations to highlight California tourism resources. The feature will be published on June 15. C-6. Media Event Perfect China Media Reception Visit California staged a special media reception (May 27) to celebrate Perfect China s 60th annual conference being held in California for the first time. It was attended by 11 members of the visiting Chinese media Fam, six LA-based media and two LA English media. They shot photos and videos of guests during the event and interviewed key partners. In addition to Visit California President & CEO Caroline Beteta, representatives of partner organizations also attended the reception. Featured organizations included: Perfect China Inc, CITS MICE Group, Anaheim/Orange County Convention & Visitors Bureau, Los Angeles Tourism & Convention Board, Orange County Visitors Association, Disney Destinations, Universal Studios Hollywood, South Coast Plaza, Simon Shopping Destinations and Beverly Hills Convention & Visitors Bureau. 12

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