Marketing South Africa in China

South African Tourism Marketing South Africa in China Third edition - 2010

SA Tourism is the Tourism Marketing Organisation of South Africa South African Tourism is the official tourism marketing organisation of South Africa. We market across the world focusing on three groups of travellers: international leisure travellers, domestic and regional traveller, and business tourists who travel to South Africa for conferences and incentives. A key part of our business is to: Understand the market Choose the attractive segments Market the destination This booklet is the third edition in the series of reports designed to help market South Africa to the Chinese. The foundation of the report sits on research conducted by South African Tourism in China in 2003 and 2007 to understand the whole of the market and not just the section we are currently seeing. This edition, based on a desktop study, contains the latest available data on both the market characteristics and South Africa s performance in this market. Current information on tourists from China to South Africa are available on our website www.southafrica.net/research. Note: This study includes Hong Kong with China while presenting the data from the South African Tourism Departure Survey 2 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 3 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Market Phase and Key Characteristics China, as an emerging travel market, is entering the growth phase Tourism Industry Life Cycle % of population travelling for leisure Introduction Growth Maturity Italy Canada US Germany, Netherlands, France, UK, Japan SADC Nigeria Kenya South Africa China, India Australia Botswana This phase may be very long Time 1 Consumer Uninformed, Price insensitive, multi-purpose Seek information & opportunity; discover leisure Very informed, price sensitive, focus on leisure Market Symptoms Product Competitor Very individualized Status oriented few One-stop-shops Emergence of packages (seeking scale effects) Emerging specialisation / focus Specialized packages High competition Clear focus Channel Unsophisticated, isolated, experience based Integrate products; information/choice provider Specialisation; Information provider Tourism Authority Actions Marketing Combine with trade initiatives Overall strategy Develop positioning shout : get as many as you can Facilitate scale effects (e.g., packages) Adapt trade and market to select segments Understand segments and select Note: 1 The duration of the four phases of the life cycle may vary significantly; their graphical representation with equal distances may thus be misleading Source: Framework based on Michael Porter: Competitive Strategy, 1980, Chapter 8 (Industry Evolution) 4 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview General Statistics China is the world s fourth largest country by size (after Russia, Canada, and USA), and the largest by population (accounting for ~20% of the world's population) Facts about China Xinjiang Beijing Heilongjiang Jilin Liaoning Geographic Characteristics Location: Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam Gansu Inner Mongolia Area: 9,569,901, sq. km. (land area) Hebei Tianjing Qinghai Ningxia Shanxi Shandong Population Tibet Shaanxi Henan Jiangsu Population, 2008: 1.33 billion Sichuan Hubei Anhui Chongqing Zhejiang Jiangxi Hunan Guizhou Fujian Yunnan Guangxi Guangdong Hainan Shanghai Population growth rate, 2003 2008: 0.54% Gross Domestic Product (current prices) GDP, 2008: USD 4,327 billion GDP per capita, 2008: USD 3,260 Annual GDP growth 1, 2007 2008: 16.85% Note: 1 Based on growth in GDP in the local currency (RMB) Source: CIA World Factbook, 2009; IMF; Grail Research Analysis 5 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Regional Statistics Over one-fourth of China s population 1,2 resides in the eight coastal provinces (Guandong, Shandong, Zhejiang, Fujian, Jiangsu, Shanghai, Beijing, and Tianjin ), and have a higher disposable income, compared to the remaining regions Annual Urban Disposable Income 3 Tier 1: < 15,000 RMB Heilongjiang Pop: 38.24MM Tier 2: > 15,000 RMB Tianjin Pop: 11.15MM Inner Mongolia Pop: 24.05MM Jilin Pop: 27.30MM Xinjiang Pop: 20.95MM Xizang/Tibet Pop: 2.81MM Qinghai Pop: 5.52MM Ningxia Pop: 6.10MM Gansu Shaanxi Pop: 26.17MM Pop: 37.48MM Sichuan Pop: 81.27MM Yunnan Pop: 45.14MM Chongqing Pop: 28.16MM Shanxi Pop: 33.93MM Hebei Pop: 69.43MM Henan Pop: 93.60MM Hubei Pop: 56.99MM Anhui Pop: 61.18MM Jiangxi Pop: Hunan 43.68MM Guizhou Pop: 63.55MM Pop: 37.62MM Guangxi Pop: 47.68MM Liaoning Pop: 42.98MM Beijing Pop: 16.33MM Shandong Pop: 93.67MM Jiangsu Pop: 76.25MM Shanghai Pop: 18.58MM Zhejiang Pop: 50.60MM Fujian Pop: 35.81MM Guangdong Pop: 94.49MM Guangzhou Hainan Pop: 8.45MM Note: 1 The population figures are for 2007; 2 MM stands for million; 3 Data for disposable income has been annualized using data for Q1 Q3, 2008, as data for Q4, 2008 was not available Source: National Bureau of Statistics of China; Grail Research Analysis 6 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Age Distribution The Chinese population is expected to age. A majority of the Chinese population is expected to fall in the age category of 50 59 years by 2025, compared to 30 39 years in 2005 Chinese Population by Age Group Male and Female, 2005 and 2025 Source: United Nations (1999), World Population Prospects, The 1998 Revision, New York 7 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview GDP and Relative Wealth China is the world s second largest economy by GDP (PPP), with a major contribution from the industry and construction sectors 100% 75% 50% 25% 0% Composition of China s GDP (at Current Prices), 2003 and 2008 USD 1,643 billion 1 USD 4,327 billion 1 32.3% 40.1% Services Top 20 Countries by GDP, 2008 Rank Country GDP (at PPP, USD Billion) 1 United States $14,441 2 China $7,927 3 Japan $4,356 4 India $3,298 5 Germany $2,918 6 Russia $2,265 7 United Kingdom $2,228 8 France $2,130 9 Brazil $1,984 10 Italy $1,818 11 Mexico $1,551 52.9% 12 Spain $1,395 48.6% Industry and Construction 13 Korea $1,345 14 Canada $1,300 15 Turkey $915 14.8% 11.3% Agriculture 16 Indonesia $910 17 Iran 2 $805 18 Australia $799 19 Taiwan $712 20 Netherlands $677 2003 2008 Note: 1 Figures have been converted using average annual exchange rate of RMB 1 = USD 0.1210 (for 2003), and RMB 1 = USD 0.1441 (for 2008); 2 Estimated value Source: CIA World Factbook, 2009; CIA World Factbook, 2004; IMF; Grail Research Analysis 8 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Personal Disposable Income and Relative Attractiveness Despite being among the top three largest economies 1, China has a low per capita disposable income due to its large population size 40,000 Per Capita Personal Disposable Income per Annum 234 2,3,4, 2008 33,858 30,000 30,304304 29,174 28,380 28,198 26,469 26,388 26,035 25,127 24,888 24,247 USD 20,000 10,000 5,285 0 USA France Germany Belgium UK Italy Canada Australia Sweden Netherlands Japan Brazil 1,736 China 617 India Note: 1 Based on current prices in US dollar ($); 2 Personal Disposable Income is personal income after the deduction of personal direct taxes and fees, and current transfers abroad (such as gifts); 3 The value of Annual Disposable Income has been converted from base currencies of individual countries to US dollar ($) using the average conversion rates for the year 2008; 4 The value of Per Capita Personal Disposable Income per annum has been calculated by dividing the Annual Disposable Income for 2008 (Euromonitor International) by the respective country s population figures for 2008 (IMF) Source: Euromonitor International; IMF; OANDA; Grail Research Analysis 9 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Vacation Participation Over half of the Chinese population go on vacations, with only ~2% travelling abroad Percentage of Chinese Population Taking Holidays, 2003 2008 Percentage of Chinese Population Taking Domestic and International Holidays, 2008 100% 2% International Domestic 75% 51% 47% 47% 45% 45% 44% Non-Holiday Takers Perce ent of Populat ion 50% 98% 25% 50% 53% 53% 55% 55% 56% Holiday Takers 1 0% 2003 2004 2005 2006 2007 2008 2008 Note: 1 Includes both Domestic and International tourists Source: Travel and Tourism China, Euromonitor International, September 2009; SAT 2009; Grail Research Analysis 10 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Vacation Participation by Age More than 50% of Chinese holiday takers are between the ages of 15 34 years Perc cent of Holiday Takers 100% 75% 7% 13% 7% 17% 17% 50% 23% 23% Chinese Holiday Takers 1 by Age, 2003 2008 8% 8% 13% 13% 13% 13% 13% 18% 24% 18% 23% 8% 18% 23% 8% 18% 23% Over 65 years 50 64 years 35 49 years 25 34 years 15 24 years 0 14 years 25% 29% 28% 27% 27% 28% 28% 0% 12% 2003 11% 2004 11% 2005 11% 2006 10% 2007 9% 2008 Note: 1 Includes both Domestic and International tourists Source: Travel and Tourism China, Euromonitor International, September 2009; Grail Research Analysis 11 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Vacation Participation by Gender A majority of Chinese holiday takers are females 100% Chinese Holiday Takers 1 by Gender, 2003 2008 Male Female 80% 45.5% 5% 45.2% 45.1% 45.2% 45.3% 45.4% 4% Perc cent of Holiday Takers 60% 40% 54.5% 54.8% 54.9% 54.8% 54.7% 54.6% 20% 0% 2003 2004 2005 2006 2007 2008 Note: 1 Includes both Domestic and International tourists Source: Travel and Tourism China, Euromonitor International, September 2009; Grail Research Analysis 12 Copyright 2010 SA Tourism. Not to be reproduced without permission

Market Overview Vacation Participation by Length of Trips Chinese holiday takers prefer to take short trips of three days or less 100% Length of Trips by Chinese Holiday Takers 1, 2003 20082008 8% 9% 7% 7% 7% 8% Over 7 days 18% 17% 16% 15% 15% 15% 4 7 days 75% Per rcent of Total Trips 50% 74% 74% 76% 77% 78% 77% 0 3 days 25% 0% 2003 2004 2005 2006 2007 2008 Note: 1 Includes both Domestic and International tourists Source: Travel and Tourism China, Euromonitor International, September 2009; Grail Research Analysis 13 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 14 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Outbound Travel Propensity Relative to Other Countries China ranks among the top five total outbound as well as long-haul outbound travel markets in the world 100 80 60 40 Top 40 Outbound Markets in the World, 2005 and 2008 2005 2008 Million 20 0 Germany UK USA China Russia Hong Kong Canada France Italy Netherlands Ukraine Japan Mexico Singapore Switzerland Sweden Romania Malaysia Belgium Spain Korea Rep Austria Turkey Taiwan India Ireland Czech Norway Belarus Poland Denmark Indonesia Australia Bulgaria Iran Brazil Egypt Kazakhstan Finland Hungary 40 30 20 Top 20 Long Haul Outbound Markets 1, 2005 and 2007 2005 2007 Million 10 0 USA UK Canada Germany China Japan France Australia Russia Italy Brazil Sweden Rep Korea India Netherlands Belgium Spain Switzerland Israel Mexico Note: 1 The long haul outbound data was calculated using the proportions estimated from WTO data source and applying it to the Euromonitor data. It is the closest approximation as this data is not available. Source: Euromonitor; IMIS; WTO Yearbook of Tourism Statistics, 2007; Grail Research Analysis 15 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Total Travel Volume The Chinese outbound travel market witnessed a strong annual growth of ~20% during 1995 2007 50 Total Outbound Trips by Chinese Travellers, 1995 2007 40 41 35 Millions of Trip ps 30 20 20.2% 17 20 29 31 10 8 9 10 12 5 5 5 0 1995 a 1996 a 1997 a 1998 a 1999 a 2000 a 2001 a 2002 a 2003 a 2004 a 2005 a 2006 b 2007 b Source: a China s Outbound Tourism: An Overview, Tourism Research Centre, Chinese Academy of Social Sciences; b China Country Overview, Tourism Australia; Grail Research Analysis 16 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Key Destinations Hong Kong and Macau are the main destinations for outbound travellers from Mainland China. Currently, South Africa has very low share of the total outbound travellers from China Regional Distribution of Chinese Outbound Travellers, 2007 Top 10 Outbound Destinations for Chinese Travellers, 2008 Europe 13% Other 6% SA represented 3% of Other travellers and 0.4% of non-hong Kong/Macau travellers Hong Kong Macau Japan 1,520 11,915 15,283 South Korea 1,352 Vietnam 996 Hong Kong & Macau 52% Thailand 662 Other Asia 28% Malaysia France 581 380 USA 276 Austria 273 0 3,000 6,000 9,000 12,000 15,000 18,000 Number of Trips (Thousands) Source: World Tourism Organisation (UNWTO); Tourism Flows Outbound China, Euromonitor International, September 2009; Grail Research Analysis 17 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Purpose of Visit and Type of Travellers Nearly 70% of international trips taken by Chinese travellers are for leisure purposes. A majority of these trips are undertaken as part of organised tour groups Percent of Outbound Tr rips 100% 75% Purpose of Outbound Trips by Chinese Travellers, 2003, 2005, and 2008 34.3% 31.0% 29.6% Business 100% Type of Outbound Leisure Trips 1 by Chinese 75% 50% 50% 25% 65.7% 69.0% 70.4% Leisure 25% Travellers, 2005 and 2008 15.1% 6.2% 9.2% 22.9% 22.0% 1.1% 7.9% 9.8% 23.1% 23.8% 1.1% 3.2% Others Backpackers Singles Friends Families Couples Organised Tour Groups 23.5% 31.1% 0% 0% 2003 2005 2008 2005 2008 Note: 1 Distribution of leisure trips by type was not available for 2003 and 2004 Source: Tourism Flows Outbound China, Euromonitor International, September 2009; Grail Research Analysis 18 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Length of Trips Over three quarters of outbound trips from China are shorter than four days 100% Length of Outbound Trips by Chinese Travellers, 2003 2008 7% 8% 7% 6% 6% 7% Over 7 days 16% 16% 15% 14% 14% 14% 4 7 days 75% nd Trips f Total Outbou Percent of 50% 25% 76% 76% 79% 79% 80% 80% 0 3 days 0% 2003 2004 2005 2006 2007 2008 Source: Travel and Tourism China, Euromonitor International, September 2009; Grail Research Analysis 19 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Importance to South Africa: Arrivals from Different Countries The volume of travellers from China to South Africa have decreased during 2003 2008 550 Total Arrivals to SA by Market 1 (excluding Africa), 2003 and 2008 500 450 400 456 485 2003 2008 Thousands of Arrivals 350 300 250 200 150 100 50 0 CAGR (2003 2008) 2008) UK 187 287 USA 257 238 Germany 121 128 Netherlands 128 128 France 72 100 Australia 57 35 Canada 50 56 Italy 52 41 India 44 29 Sweden 43 40 China 36 17 Brazil 21 28 1.2% 8.9% -1.5% 1.2% 0.0% 6.9% 10.4% 2.2% 4.8% 8.4% -1.2% 15.4% 5.3% Japan Note: 1 Only the countries covered in the study are considered Source: SAT, 2009; Grail Research Analysis 20 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Total Chinese Travel Volume to South Africa Chinese arrivals to South Africa increased at an annual rate of ~20%, during 1998 2004. However, arrivals decreased at ~3% annually, during 2005 2008 Number of Arrivals from China to SA, 2003 20082008 60,000 CAGR (1998 2000) 8.1% CAGR (2001 2004) 19.8% CAGR (2005 2008) -3.0% 51,080 50,000 47,378 40,000 36,957 42,822 44,228 41,962 40,320 Arrivals 30,000 26,106 30,209 30,483 29,681 20,000 10,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: SAT, 2009; Grail Research Analysis 21 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Arrivals from China The number of arrivals from China to South Africa, as well as the share of South Africa in total Chinese outbound travel decreased, during 2003 2008 Chinese Travellers to SA, 2003 2008 Thou usands of Arriv vals 100 80 60 40 20 Percentage of SA in Total Outbound Travel from China CAGR 2003 2008 Arrivals from China to SA Arrivals: -1.2% 2008 Beijing 013% 0.13% Olympics 0.11% 0.10% 0.10% 0.09% 0.10% 51 43 44 42 47 40 0.16% 0.12% 0.08% 0.04% ound to SA Chinese Outb Percentage 0 2003 2004 2005 2006 2007 2008 0.00% Note: 1 Arrivals data has been sourced from SAT, and percentage share of South Africa has been calculated from Euromonitor data Source: SAT 2009; Tourism Flows Outbound China, Euromonitor International, September 2009; World Tourism Organisation (UNWTO); Grail Research Analysis 22 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Importance to South Africa: Economic Value Relative to other focus countries, Chinese arrivals to South Africa were significantly lower in 2008. However, their spend per trip 3,4 was the highest in 2008 Importance to South Africa, 2008 Market Seasonality Index 1 Distribution 2 Spend Per Trip in SA (Rand) 3,4 Arrivals Value (In Million Rand) 3 UK 8.3% 1.68 12,700 485,166 5,868.1 USA 5.3% 1.81 16,000 287,438 4,352.7 Germany 10.3% 1.84 12,500 238,306 2,735.9 Netherlands 15.8% 2.12 15,100 128,097 1,630.2 France 10.8% 2.39 10,300 127,956 1,238.7 Canada 4.3% 2.02 14,400 56,904 7,68.5 India 6.1% 1.54 15,400 51,929 764.7 China 12.1% 1.67 18,400 40,320 763.5 Italy 32.1% 1.91 11,500 55,545 595.0 Note: 1 An index value of 0% represents perfect seasonality, i.e., the market is not characterised by large fluctuations from month to month. A value of 100% means that seasonality is very poor, i.e., the market is characterised by large fluctuations month by month; 2 Average number of provinces visited by all foreign tourists; 3 Total Foreign Direct Spend (excl. capex.); 4 Rounded-down to the nearest hundred Source: SAT Departure Survey, 2003 2008; SAT 2009; Grail Research Analysis 23 Copyright 2010 SA Tourism. Not to be reproduced without permission

Travel Patterns Out of China Tourist Spend in South Africa South Africa s tourism industry significantly benefited due to the appreciation of the RMB relative to the Rand, in 2008 18 1.8 Exchange Rate, Rand per RMB, 2003 2008 Spend Per Trip 1,2 by Chinese Travellers in SA, 2003 2008 2008 25,000 20,000 9.3% 18,400 1.5 Rand 15,000 10,000000 11,800 9,400 8,700 9,200 10,900 Rand / RM MB 1.2 0.9 06 0.6 5,000 0 2003 2004 2005 2006 2007 2008 RMB 13,000 12,100 11,200 10,900 11,700 15,400 Spend Per Day 1,3 by Chinese Travellers in SA, 2003 2008 1,500 0.3 Rand 1,000 500 490 400 17.3% 520 550 830 1,090 0.0 2003 2004 2005 2006 2007 2008 0 2003 2004 2005 2006 2007 2008 Average yearly exchange rate 0.9 0.8 0.8 0.9 0.9 1.2 RMB 540 520 670 650 900 920 Note: 1 Total Foreign Direct Spend (excl. capex.), 2 Rounded-down to the nearest hundred; 3 Rounded-down to the nearest ten Source: OANDA; SAT Departure Survey, 2003 2008; Grail Research Analysis 24 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 25 Copyright 2010 SA Tourism. Not to be reproduced without permission

Consumers: Target Segments Where to Focus: Breakdown of Total Market in Greater City Region Four focus segments were identified, representing 49% of the market size Total Number of People in Our Market Total Chinese population 1 Urban population in GREATER REGIONS OF Beijing, Shanghai, Guangzhou and Shenzhen 1,298.8 million (100% of total) 241.9 million (18.6% of total) = 12.9 million 100% Between the ages of 25 and 60 129.6 million (10% of total) Have travelled internationally on leisure trips in the last 5 years (outside of close Asia) 15 million (1.2% of total) And, who have HH income of 10,000 RMB+ per month (or have been on sponsored trips) 12.9 million (1.0% of total) Focus Segments Organised Wanderlusters 1,731k Purpose Travellers 1,473k Experienced Wanderlusters 2,105k Upcoming Wanderlusters 975k = 6,284,000 49% Source: 1 CIA 26 Copyright 2010 SA Tourism. Not to be reproduced without permission

Consumers: Target Segments Organised Wanderlusters: Consumer Portrait Purchase and Usage Environment Desired Experience Beliefs and Associations Demographics Travel Desires 57% females Considers scenery and relaxation most important when choosing Travels in groups because they are Above average share (33%) in Guangzhou and destinations convenient and makes visas easier to obtain below average share (20%) in Beijing Popular holiday activities include tasting local foods, visiting cities, Highly likely to use one of China s large Work experience reflects regional differences shopping and relaxing at the beach travel agencies for the following services: Relatively l high h share of 21% are self- Australia is the most favourite holiday destination Decide on activities at destination, employed or work at family firm Relatively high share of 14% are business Potential Travel to South Africa making bookings, provide different packages to choose from owners Would like to visit SA on a group package tour Lower education level 32% only have high As with their other holidays, segment would also prefer to relax at South Africa school education the beach and to see natural beauty in SA Generally do not hold strong negative Higher income level 40% earn over RMB Above average length of stay and spend per person: 13 days for perceptions p of South Africa 15,000 per month household income a price of RMB 24,000 per person Past Travel Profile Self-paying travellers High number of destinations in past 5 years All have travelled to 2+ destinations Many travel during golden weeks, as a large share (45%) have no paid vacation days Interest and Awareness Low worldly Lower interest and awareness of South Africa Friends and relatives, newspapers and travel agents are where most first hear about destinations Purchase and Usage Behaviour Channel Lower than market average believe that apartheid still affects SA and AIDS is an important issue Few (15%) have friends and relatives who have been to South Africa Top barriers are lack of knowledge on what to do in South Africa, concerns about health and safety, and fear that they will face a language barrier Behaviour Profile Very few (19%) prefer independent travel Most make bookings 2 weeks to 1 month before travelling Very high dependence on travel agents and word-of-mouth when seeking information about destinations High share (43%) travelled with only their spouse on their favourite holiday Spend Highest holiday budgets amongst the 4 priority segments 100% have budget of RBM 15,000 or more per year 72% spent RMB 15,000 or more on their favourite holiday Channel Travel agents are used for almost all bookings, with the two most popular being CTS and CITS 27 Copyright 2010 SA Tourism. Not to be reproduced without permission

Consumers: Target Segments Experienced Wanderlusters: Consumer Portrait Purchase and Usage Environment Desired Experience Beliefs and Associations Demographics An average age of 35 About half males / half females Most are married and about half have kids Travel Desires While on holiday, almost all like to taste local food and learn about the culture Also likely to want to seeing local icons, relax on the beach, and visit cities More likely than others to want to meet local people p and stay with local people in their homes Important factors when choosing a destination include scenery, relaxation, architecture, and foreign culture / food Favourite past destinations include Thailand and Australia Future trips are likely to include Japan, Australia, USA, and France Potential Travel to South Africa If visiting SA, extremely likely to want to view wildlife Also interested in relaxing on the beach and enjoying natural scenery; less likely than others to want to do the wine route Most would want a group package tour, though more likely than other segments to want to stay at a resort and have a luxury holiday Would spend about RMB 25,000 per person for 1 2 week holiday in South Africa Channel Believes the advantages of group travel lie in convenience, little effort, and ease of getting a visa Travel agents are influential, as more than half use them for helping to decide on activities at the destination, and over one-third get advice on destination choice South Africa Many positive perceptions about SA: believes that South Africa offers plentiful wildlife, is welcoming to tourists, and has good value for money Almost half living in Shanghai, working for either SOEs or MNCs Highly educated 82% have university education Past Travel Profile All are self-paid travellers Well-travelled, with one-quarter having been to five or more destinations over the past five years TSM are most popular past destinations, However, very few believe SA is a developed followed by France, Australia, Germany, Japan, country and most think it is very hot, politically South Korea unstable, and still affected by Apartheid More likely than others to travel when the weather is More likely than others to have friends or better at destination than in China; relatives who have visited SA; though, this word One-third travel in October of mouth is likely to be neutral Interest and Awareness Highly worldly, by definition, and especially likely to read international news Influenced by friends, travel magazines, and TV travel programmes Very aware and actively interested in SA; 40% have even searched the Internet for SA information Purchase and Usage Behaviour Top barriers preventing a trip to SA are concern about personal safety, lack of knowledge, and concerns about health Behaviour Profile Many in Segment 5 prefer independent travel and only about half (lower than other segments) typically book full package group tours Most book about one month before going on their holidays, but tend to plan for slightly more time Spend Much higher budgets than the average, with about 40% spending over RMB 20,000 each year on holidays Channel Internet is significantly the most popular information source; others sources used may include word of mouth, travel agents, and travel magazines When travelling independently, more likely than others to book directly from airlines or hotels Most likely to travel with friends or a spouse Very unlikely to travel with colleagues 28 Copyright 2010 SA Tourism. Not to be reproduced without permission

Consumers: Target Segments Upcoming Wanderlusters: Consumer Portrait Purchase and Usage Environment Desired Experience Beliefs and Associations Demographics Half male, half female, with an average age of 35 A large share (27%) is single and 51% do not have kids yet 31% live in Guangzhou and another 36% live in Shanghai 76% earn over RMB 10,000 household income per month Past Travel Profile All are self-paying travellers All have visited only 1 destination in the past 5 years 18% went to Thailand, 14% to South Korea and 14% to Japan Most have travelled during the summer months of July through September Interest and Awareness Highly worldly, with 70% eating foreign foods regularly and 49% participating in adult hobby classes (e.g., history) Interested in SA and a high proportion p (22%) have asked travel agents about holidaying in South Africa Friend and relative recommendations are the most popular ways to first hear about a destination Travel Desires Good value for money is an important consideration in destination choice Travels to relax and to enjoy beautiful natural scenery Enjoys tasting local food and visiting cities, similar to most Chinese travellers Also more likely to enjoy more atypical activities of staying with locals in their homes, off-road driving, golfing and gambling Japan is very popular Japan is the 3rd most common destination they have travelled to in the past and the 3rd most likely destination to travel to in the future Potential Travel to South Africa If travelling to South Africa, interested in seeing wildlife and the natural beauty They would prefer to travel in a group package tour On average, plan to spend RMB 19,000 per person for a 10 day trip Purchase and Usage Behaviour Channel Most do not use travel agents to help decide on activities at destinations Travel in group tours mainly for convenience and safety South Africa Personal safety is the main barrier to travel to SA Also more likely to mention high costs and lack of time to see the country as barriers Strong positive perceptions that South Africa offers plentiful wildlife and is a welcoming destination to tourists Common negative beliefs that SA is very hot, faces an AIDS issue, and is still affected by apartheid One-quarter know friends and relatives who have been to South Africa, though many of them give it a neutral rating Behaviour Profile Total planning time (from origination to actual trip) is about 1 2 months Over half regularly travel in group package tours Most common travel companions are friends and family Spend High enough holiday budgets and holiday spend to afford a holiday in South Africa* 52% have annual holiday budgets RMB 15,000+ per person 63% spent RMB 15,000+ per person on their favourite trip Channel 57% rely on travel agents and tour operators when they do independent travel CTS and CITS are the most popular travel agencies used 46% looks into 3 different sources of information when deciding on holiday destinations and planning them Most popular information sources are Internet and friend and relative recommendations 29 Copyright 2010 SA Tourism. Not to be reproduced without permission

Consumers: Target Segments Purpose Travellers: Consumer Portrait Purchase and Usage Environment Desired Experience Beliefs and Associations Demographics Predominantly a male segment Higher average age of 40 Most are married and have kids Half live in Shanghai and one-third live in Beijing The majority work in state-owned enterprises / government and another 31% work for multinational companies Past Travel Profile All sponsored travellers Extremely well travelled: all have visited 2 or more destinations in past 5 years Most do not travel at any particular time of the year 90% receive vacation days from their employer Those with vacation days generally will take 8+ days off each year Interest and Awareness Highly worldly segment who are particularly likely to interact with foreign suppliers and clients and go on international business trips Friend and relative recommendations are less important when compared with the overall market and Internet is more important as sources of influence for hearing about holiday destinations Travel Desires Besides having beautiful natural scenery, unique architecture is also a key criteria for choosing a destination When on holiday, likely sees most of the local icons, visits the cities, and tastes local cuisine Australia a and the United States are the most likely future u destinations as well as the most common favourite past destinations Holidays within Asia are less popular Potential Travel to South Africa On a trip to South Africa, the desired activities are seeing the natural beauty and relaxing at the beach Most want to travel in a group a package tour A significant portion (40%) want a mix of an active holiday and relaxing time on the beach An average trip to SA should last about one week and cost RMB 10,000 to 15,000 per person Purchase and Usage Behaviour Behaviour Profile Preferences for group vs. independent travel are mixed 38% prefer independent travel much higher than market average Relatively short time between origination and making a booking 30% make reservations within 2 weeks of choosing destination Very likely to travel with colleagues on holiday Spend Channel Average-sized holiday budgets which are likely to be RMB 15,000 to 20,000 per year Spend on favourite trip is slightly higher than budget, at RMB 20, 000+ per person Channel Highly involved travellers 65% use 3 different sources to evaluate and plan a holiday Internet is by far the most common source of information Also significantly more likely to use travel magazines, and country tourism boards Travel agents are used for fulfilment primarily: for making bookings on trips segment decided Group travel is attractive because it is more convenient, safe and cheap; not as likely to use group for language or visa reasons South Africa Strong positive perceptions of South Africa, including good wildlife and welcoming to tourists AIDS is the strongest negative perception of SA Over one-third have friends or relatives who have travelled to SA compared to other segments World of mouth is more positive than market average Top barriers include concern for personal safety, health, and lack of knowledge More likely than others to be concerned by lower value for money and lack of time to see the country 30 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 31 Copyright 2010 SA Tourism. Not to be reproduced without permission

Channel Market Structure : Players Value Chain South Africa group packages flow through multiple channels to Chinese consumers Product Owners Intermediaries China Outbound Travel Agents Consumers Airlines SA Hotels Ticketing Agents rket from China outbound ma Business Trip Specialist Integrated Travel Agents MICE Buyers SA Attractions SA Transportation SA ADS Approved Inbound Tour Operators ations bar for reign players Retail Only Travel Agents 1 Self-funded Travellers HK Wholesalers Large Travel Agencies China regul Note: 1 Domestic flights, if any, are purchased directly form airlines; special players, like Longway, bridge multiple categories (inbound operator and business specialist). In this diagram, Longway is considered a business trip specialist; in peak season, volume shifts to self-funded travellers; FIT leisure travel to SA estimated at less than 5%; retail only travel agents for SA might act as integrated travel agents for domestic and more popular international destinations Source: Monitor Interviews; Monitor Analysis 32 Copyright 2010 SA Tourism. Not to be reproduced without permission

Channel Key Trends in the Chinese Travel Market Role of the Internet China has the largest online population in the world. However, online travel retail market sales make up only 8% of the total travel retail market share The low market share is attributed to a large proportion of the Chinese population not using credit cards; hence, they are unable to transact online Chinese consumers heavily use internet to decide which travel package to purchase With the development of the Credit Rating System in China and increasing popularity of LCCs, which demand online payment, the scenario for internet sales is likely to improve Negative Impact of the Economic Slowdown The economic crisis reduced the purchasing power of the Chinese middle class, who are the major consumers of tourism products. This negatively impacted the overall tourism market The growth in travel retail sales slowed down to 8% in 2008 However, the upper class was less affected by the slowdown, compared to other income segments More travellers are opting for shorter and simpler trips. These do not require the services of travel agents Vertical Integration Chinese travel retail operators are expanding their business by integrating vertically in the value chain Travel retail operators are increasingly acquiring tourist spots, hotels and airlines to increase profit margin, expand business, and improve brand awareness among consumers. For instance, CTS now owns and operates the cable car at Mount Huang in Anhui Vertical integration strategy has proved successful for travel retail operators. Experts expect retailers to benefit from this after the market recovers from the economic slowdown Policy Changes China allowed foreign investments in inbound and domestic tourism industry, after joining WTO in 2001 The travel agency sector was also gradually opened up for foreign investments, during 2003 2007 In the last decade, the Civil Aviation Administration of China (CAAC) has also gradually opened up the aviation market, by allowing new, privately-owned airlines to operate Privatisation has led to increased competition and raised the standard of services offered However, the outbound travel agency sector is still not open for foreign investments Source: Travel and Tourism China, Euromonitor International, September 2009; Travel Retail China, Euromonitor International, September 2009; Grail Research Analysis 33 Copyright 2010 SA Tourism. Not to be reproduced without permission

Channel Travel Retail Outlets The number of travel retail outlets, dominated by travel agents, increased at a CAGR of 8%, during 2003 2008 28,000 24,000 Number of Travel Retail Outlets in China, 2003 2008 Tour Operators Travel Agents lets Number of Outl 20,000 16,000 12,000 8,000 13,361 12,551 810 15,339 14,483 856 16,473 15,595 878 8.1% 17,246 921 16,325 18,943 983 17,960 19,687 1,034 18,653 4,000 0 2003 2004 2005 2006 2007 2008 Source: Travel Retail China, EuroMonitor International, September 2009; Grail Research Analysis 34 Copyright 2010 SA Tourism. Not to be reproduced without permission

USD (Million) Channel Travel Retail Sales by Product Chinese travel sales grew by 27% annually, to USD 26.3 billion, during 2003 2008. Individual bookings for package holidays, city break, and flights accounted for more than 75% of the market sales 32,000 28,000 24,000 20,000000 16,000 12,000 8,000 4,000 0 7,956 1208 1,208 1,981 3,194 2003 502 17 398 180 477 12,545 1,846 3,199 5,249 2004 Travel Retail Sales in China by Products 1, 2003 20082008 691 17 517 247 778 15,827 1010 1,010 2,289 4,021 6,603 2005 27.0% 732 18 125 148 587 294 19,675 1,349 2,714 4,980 7,897 2006 770 19 135 368 669 773 22,329 1,603 3,062 5,561 8,779 2007 921 32 172 474 806 920 26,291291 1,087 1,043 1,102 1,993 3,554 6579 6,579 10,067 2008 43 222 600 Other travel retail products Other transport Adventure/trekking holiday Spa packages Cruise Fly-drive Accommodation only Flight only City break Package holiday Note: 1 The values have been converted from national currency to USD using average annual exchange rate of respective years Source: Travel Retail China, Euromonitor International, September 2009; OANDA; Grail Research Analysis 35 Copyright 2010 SA Tourism. Not to be reproduced without permission

Channel Travel Retail Internet Sales by Product Chinese internet travel sales grew 44% annually 1 (2003 2008) to USD 2.2 billion. Individual bookings for accommodation and flights accounted for over 90% of the market USD (Million n) 2,500 2,000 1,500 1,000 500 0 Travel Retail Internet Sales in China by Product 1, 2003 2008 Other travel retail online sales 2 Other transport only Car rental only Traditional package holiday Flight only Accommodation only 350 96 222 2003 13 4 11 502 153 302 2004 23 4 5 14 744 244 428 2005 44.4% 4% 37 5 7 22 987 334 558 2006 51 6 7 31 1,766 62 7 8 35 639 1,015 2007 2,200 76 805 1,263 2008 8 9 40 Commentary China has the largest online population in world; however, its online retail market remains underdeveloped d d The internet-based travel retail segment in China is still evolving Internet sales had a share of only 8% in the total travel retail market, in 2008 The main reason for the low market share is attributed to the large proportion of Chinese consumers not using credit cards, which is essential for online transactions The growth in internet travel retail sales is high. It was 44% during 2003 2008, compared to growth in the overall travel retail sales, which grew at 27% ELong and Ctrip are the major players in the internet travel retail market Note: 1 The values have been converted from national currency to USD using average annual exchange rate of respective years; 2 Others include tourist attraction entrance fees, car rental hire, travel insurance, and foreign currency purchase sold via exchange services, which may be located within travel agents Source: Travel Retail China, Euromonitor International, September 2009; Grail Research Analysis 36 Copyright 2010 SA Tourism. Not to be reproduced without permission

tage of Retail Value Percent Channel Travel Retail Products: Top Players The Chinese travel retail market is highly fragmented, with over 18,000 travel agents operating in the country Chinese Travel Retail Products Market Share, 2004 2008 1 100% 50% 40% 30% 20% 10% 0% 44.4% 43.6% 46.0% 2.9% Others 3.2% 54.2% 53.0% 2.8% 3.6% China CYTS 37% 3.7% 3.6% Shanghai Xinhua 5.3% 5.5% 2.9% Shanghai Daily 2.5% 5.2% 3.4% Shanghai Aviation 4.2% 5.4% 6.3% Holiday Tour 5.4% 30% 3.0% 5.2% Shanghai Railway 5.4% 3.1% 5.4% 5.3% Shanghai Dazhong Tourism 5.4% 5.8% 5.7% China International Tour 5.8% 5.8% 4.9% China Kanghui Tourism 52% 5.2% 66% 6.6% CTS (Holdings) Travel 6.0% 5.4% 6.2% Shanghai Chunqiu Tourism 5.8% 3.6% 5.9% 6.7% 2004 6.6% 6.2% 6.9% 2005 6.2% 6.3% 0.7% 6.6% 6.2% 6.7% 6.8% 6.9% 7.2% 7.4% 2006 2007 2008 Commentary The Chinese travel retail market was set up to handle travel needs of government departments in communist era, and the sector is still evolving CTS and CYTS are brands from the communist era Except for a few major travel agencies, the Chinese travel retail market is extremely fragmented, with over 18,000 travel agents There is a lack of genuine travel retail chains in China, which presents a good opportunity for foreign brands to enter the Chinese market Chinese tourism operators are expanding their business and improving the brand awareness, by developing other tourism products Tourism operators in China are increasingly operating and developing scenic spots under the privatization policy of the Chinese government Note: Data for 2003 was not available Source: Travel Retail China, Euromonitor International, September 2009; Grail Research Analysis 37 Copyright 2010 SA Tourism. Not to be reproduced without permission

Channel Flight Price: South Africa vs. Competing Destinations Flights from China to South Africa are cheaper, compared to flights to most of its competitor countries, on USD/km basis Details of Flights from China to SA and Major Competitor Countries, 2010 Route 1 Lowest Published Round Trip Fare 2 (USD) Flight Time (incl. stopover) Departure / Return (Hours) One Way Distance (km) Cost / km (USD) (BJS) China Washington, US Continental 3 1,201 28/17 11,170 0.11 (BJS) China Johannesburg, South Africa Emirates 3 1,259 20/18 11,693 0.11 (BJS) China Cairo, Egypt Air China 865 16.5/23.5 7,556 0.11 (BJS) China Cape Town, South Africa Emirates 3 1,313 23/22 12,945 0.13 (BJS) China Rome, Italy Air China 1,062 10.5/10.5 7,705 0.14 (BJS) China Brasilia, Brazil Air China 3 2,386 32/40 4 16,583 0.14 (BJS) China Paris, France Air China 1,133 11/10 8,236 0.14 (BJS) China Nairobi, Kenya Emirates 3 1,341 17/17.5 9,214 0.15 (BJS) China London, UK Air China 1,004 11.5/10.5 5 8,160 016 0.16 (BJS) China Sydney, Australia China Southern 3 1,566 14/15 8,923 0.18 (BJS) China New Delhi, India Dragonair 3 673 10/11.5 2,712 0.25 Note: 1 Direct flight routes have been considered, if available, else, data presented for indirect flight; 2 Lowest listed roundtrip fares from consolidator, inclusive of taxes on 22 February 2010. Assuming travel on 9 th March, 2010 and return flight on 11 th March, 2010; 2 Flight between Beijing and destination is an indirect flight; 3 Indirect flight having 2 or more stops Source: Expedia; Travelmath; Grail Research Analysis 38 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential Market and Their Perceptions 39 Copyright 2010 SA Tourism. Not to be reproduced without permission

Competitors Relative Market Position of Prioritized Competitors India and Egypt experienced the highest growth in visits from China, during 2003 2007 1,500 Trips by Chinese Travellers to Major Competitor 1 Countries, 2003 2007 ls Thousa ands of Arrival 1,000 500 623 11 43 21 68 21 126 776 51 95 96 251 16 30 34 888 45 95 95 285 18 44 35 1,040 51 62 107 117 308 31 42 1,298 47 80 88 143 160 358 23 CAGR (2003 2007) 2007) Brazil 21.7% South Africa 2.6% Egypt 39.3% India 42.9% UK 20.5% Italy 6.2% Australia 19.4% USA 26.1% 176 157 203 270 320 397 0 2003 2004 2005 2006 2007 Note: 1 Competitor countries were selected from Brand Tracker study, Nov 2009; data for Kenya was not available at the time of publishing Source: World Tourism Organization (UNWTO); Grail Research Analysis 40 Copyright 2010 SA Tourism. Not to be reproduced without permission

Competitors Competing Destinations Offering Similar Products (1 of 2) USA, Brazil, and Australia compete 1 with South Africa by providing beach experience. While Kenya competes 1 on the basis of nature/wildlife and adventure South thaf Africa USA Brazil Australia Kenya Italy Beach Nature / Wildlife History / Culture Adventure Scored high for describes extremely well Note: 1 Strong competitors based on performance ratings How well do the following attributes describe each international leisure destination using a scale from 1 to 7 where 1= does not describe at all and 7= describes extremely well. Pictures were selected from websites relevant to the countries Source: SAT Brand Tracking, November 2009; Grail Research Analysis 41 Copyright 2010 SA Tourism. Not to be reproduced without permission

Competitors Competing Destinations Offering Similar Products (2 of 2) The UK and Egypt compete strongly 1 with South Africa on historical and cultural experiences South thaf Africa UK Egypt India France Beach Nature / Wildlife History / Culture Adventure Scored high for describes extremely well Note: 1 Strong competitors based on performance ratings How well do the following attributes describe each international leisure destination using a scale from 1 to 7 where 1= does not describe at all and 7= describes extremely well. Pictures were selected from websites relevant to the countries Source: SAT Brand Tracking, November 2009; Grail Research Analysis 42 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 43 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Demographics Age Distribution Over 60% of Chinese travellers to South Africa are are in the age group of 25 44 years Chinese Travellers to SA by Age, 2003 2008 2008 100% 80% 6% 19% 1% 4% 15% 2% 1% 1% 1% 1% 6% 5% 4% 5% 65+ years 55 64 years 15% 15% 18% 45 54 54 years 20% 35 44 years 25 34 years 18 24 years Perc cent of Travelle ers 60% 40% 34% 36% 32% 37% 34% 29% 20% 28% 33% 37% 34% 34% 39% 0% 12% 9% 9% 8% 6% 8% 2003 2004 2005 2006 2007 2008 Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 44 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Demographics Gender Distribution Over two-thirds of Chinese travellers to South Africa are males 100% Chinese Travellers to SA by Gender, 2003 2008 Female Male 80% 28% 29% 33% 32% 29% 29% Perc cent of Travelle ers 60% 40% 72% 71% 67% 68% 71% 71% 20% 0% 2003 2004 2005 2006 2007 2008 Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 45 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Demographics Income Distribution The proportion of high income earners (earning more than R20,000 per month), travelling from China to South Africa, increased from 30% in 2004 to 62% in 2008 Chinese Traveller to SA by Income Category (Monthly Income in Rand), 2003 2008 100% 21% 25% 18% 18% 17% 4% 7% < R5,000 R5,000 to R9,999 R10,000 to R19,999 80% R20,000 to R39,999 12% 19% 18% 20% 27% R40,000 Percen nt of Travellers 60% 40% 25% 24% 22% 35% 30% 28% 32% 20% 27% 16% 15% 20% 21% 30% 15% 14% 13% 13% 15% 0% 2003 2004 2005 2006 2007 2008 Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 46 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Demographics Occupation A majority of Chinese travellers to South Africa are professionals, with their proportion having increased from 36% in 2003 to 59% in 2008 Perc cent of Travelle ers 100% 80% 60% 40% 16% 18% 9% 1% 14% 11% Chinese Travellers to SA by Occupation, 2003 2008 2008 7% 4% 24% 25% 11% 11% 11% 10% Others 1 Student 4% 5% 6% 6% Self employed 5% 3% 6% /Businessman 6% 5% 4% Clerical - sales 6% 6% Executive - Managerial 20% 22% 14% Professional 24% 20% 36% 37% 46% 54% 54% 59% 0% Note: 1 Others include Transport/communication, Entertainment, Semi skilled, Unskilled, Informal sector, Artisan, NGOs - Community services, Unemployed, Retired - pensioner, Labourer, Civil servant, and Home executive Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 2003 2004 2005 2006 2007 2008 47 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Demographics City of Residence A majority of Chinese travellers to South Africa reside in Beijing, Shanghai, and Hong Kong Perce ent of Traveller rs 100% 80% 60% 40% Major Cities of Residence of Chinese Travellers to SA, 2003 2008 15% 16% 17% 21% 1% 19% 2% 1% 1% 34% 1% 4% 5% 1% 3% 2% 2% 4% 1% 7% 1% 1% 2% 7% 27% 31% 2% 33% 30% 6% 3% 14% 14% 9% 14% 22% 12% 18% 20% 1% 1% 1% 2% 3% 3% Others Qingdao Hangzhou Tiajin Guangzhou Peking Quangzhou Shenzhen Hong Kong 1 Shanghai Beijing 20% 38% 31% 28% 23% 19% 26% 0% 2003 2004 2005 2006 2007 2008 Note: 1 Hong Kong has been considered as a city Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 48 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 49 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Summary Chinese travellers contributed ~R2.9 billion to the South African economy, during 2003 2008. The average contribution by a business traveller was higher than by other visitors General Holiday VFR Business Traveller 1 Business Tourists All Chinese Arrivals Total Volume ( 03 08) 112,865 21,469 86,973 26,958 264,227 TFDS (excl. capex) 2 ( 03 08) (Billion Rand) R1.11 R0.19 R1.15 R0.22 R2.87 Value / Volume Index ( 03 08) 0.90 0.79 1.21 0.75 N/A Spend / Day 3 ( 03 08) R950 R330 R680 R860 R620 Total Prepaid Spend ( 03 08) (Billion Rand) TFDS (excl. capex) 2 to Prepaid Spend ( 03 08) R1.86B R0.19 R1.26 R0.37 R3.86 0.60 0.96 0.91 0.60 0.74 2008 Average Length of Stay 961 9.61 26.41 18.44 10.1818 16.78 Average Number of Provinces Visited ( 03 08) 2.4 1.6 1.5 1.6 1.9 Note: 1 Business: A trip which is undertaken to conduct commercial or formal transactions or activities that are related to a person s job, e.g., visiting a client, signing deals, negotiating a contract (including import / export), etc.; 2 Total Foreign Direct Spend (excl. capex.); 3 Rounded-down to the nearest ten Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 50 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Purpose of Visit The most common purpose of visit of Chinese travellers to South Africa changed from holiday in 2003 to business travel 2 in 2008, with business 2 also being the fastest growing category Pe rcent of Arriva als Primary Purpose of Visit of Chinese travellers to SA, 2003 and 2008 100% 75% 50% 25% 7% 5% Other 1 5% 7% Business Tourist 7% 7% VFR Holiday Business Traveller 2 38% 53% 43% 28% f Arrivals Percent of 75% 60% 45% 30% 15% 0% 43% Holiday Percent of Chinese Arrivals to SA by Purpose, 2003 2008 Combined 33% Business Traveller 2 10% Business Tourist 8% VFR 6% Other 1 0% 2003 2008 CAGR (2003 2008) -2.7% 12.8% 12.8% 5.9% -3.3% Note: 1 Other includes visitor categories, Shopping Business, Shopping Personal, Medical, Religion and Others ; 2 Business: A trip which is undertaken to conduct commercial or formal transactions or activities that are related to a person s job, e.g., visiting a client, signing deals, negotiating a contract (including import / export), etc. Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 51 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Travel Partner Chinese travellers usually visit South Africa alone, with their proportion having increased, during 2003 2008 Percentage of Chinese Travellers to SA by Travel Partners, 2003 20082008 Perce ent of Traveller rs 100% 80% 60% 40% 4% 2% 2% 3% 3% 5% 4% 6% 12% 6% 4% 15% 11% 10% 19% 11% 15% 24% 15% 18% 17% 8% 20% 3% 5% 1% 4% 3% 6% 8% 9% 27% 17% 18% 22% Children under 18 years Family/children over 18 years Friends Spouse/partner Colleagues/associates Tour group Alone 20% 40% 45% 43% 35% 35% 46% 0% 2003 2004 2005 2006 2007 2008 Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 52 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Length of Stay A majority of Chinese travellers stay for 5 days in South Africa. The average length of stay of all travellers decreased from 21 to 17 days, during 2003 2008 Length of Stay of Chinese Travellers in SA, 2003 20082008 25 21.3 21.7 Average Length of Stay Most Common Length of Stay 20 16.0 16.4 16.8 Num mber of Nights 15 10 12.9 7.0 5 5.0 5.0 5.0 5.0 5.0 0 2003 2004 2005 2006 2007 2008 Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 53 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Spend per Trip/Prepaid Spend Both average prepaid spend and average spend per trip 2 by Chinese travellers to South Africa grew at a rate of ~10%, during 2003 2008 24,000 Average Prepaid Spend by Chinese Travellers to SA 1, 2003 2008 21,100 24,000 Average Spend Per Trip (TFDS 2 excl. Capex) by Chinese Travellers to SA 1, 2003 2008 n Rand) Pre epaid Spend (i 20,000000 10.2% 20,000000 18,500 17,100 16,000 14,900 13,500 13,000 12,000 8000 8,000 TFDS excl. capex (in Rand) 16,000 12,000 8000 8,000 11,800 9,400 8,700 9.3% 9,200 10,900 18,400 4,000 4,000 0 2003 2004 2005 2006 2007 2008 0 2003 2004 2005 2006 2007 2008 Mean = R16,300 Mean = R11,400 Note: 1 Rounded-down to the nearest hundred; 2 Total Foreign Direct Spend (excl. capex.) Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 54 Copyright 2010 SA Tourism. Not to be reproduced without permission

100% 75% Current Chinese Travellers to South Africa: Travel Behaviour South African Package Tour Types A majority of Chinese leisure travellers to South Africa purchase package deals and independent airline tickets through travel agents Channel for Purchasing Independent Deals 2,3, 2008 0.8% 1.1% 11.3% 24.1% 33.7% Package Type Purchased by Chinese Leisure Travellers tosa 1,2, 2008 Independent 36% 100% 75% Channel for Purchasing Packaged Deals 2,3, 2008 1.7% 0.7% 0.2% 0.7% 1.0% 1.4% 50% 33.8% 50% 97.7% 96.7% 64.6% 25% Package 64% 25% 30.6% 0% Airline Accommodation Directly with Airline Direct with Airline via Internet Tour operator Didnt pay/stay with family/friend 0% Airline Directly with place of accommodation Travel agent Accommodation Note: 1 Package refers to the following: Full Package = Flight, Accommodation, Car hire and Food; Fully Inclusive Package = Flight, Accommodation, Food and Coach; Package = Flight, Accommodation, and/or Car hire; Independent = Separate booking for Flight, Accommodation, Car hire, Coach and Food; 2 Includes only travellers whose primary or secondary purpose of travelling is holiday; 3 Data has been re-proportioned to make the total equal to 100% Sources: SAT Departure Survey, 2008; Grail Research Analysis 55 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Activities Undertaken Visiting natural attractions and watching wildlife are the most common activities 1 of Chinese travellers in South Africa 180 Volume of Chinese Travellers to SA by Activity 1, 2003 2008 Combined 156 150 137 133 Tho ousands of Tou urists 120 90 60 112 109 103 62 52 30 0 Visiting natural attractions Wildlife Visited a Casino Cultural historical and heritage Business Beach Theme parks Social 17 Adventure 10 Trading 9 Sporting 3 Medical 3 Health 1 Education and Training 0 Hunting Note: 1 Excludes Shopping and Nightlife Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 56 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Reasons for Satisfaction Scenic beauty and wildlife/game-park experience are the most common reasons for satisfaction among Chinese travellers to South Africa Top 15 Reasons for Satisfaction Among Chinese Travellers to SA, 2004 20082008 Combined 1 Scenic beauty Wild life / Game park / Safari Friendly people / Hospitality Business opportunities Visiting friends / family Good service Weather / climate Good infrastructure Culture and Heritage Diverse experience Beach Resturants / Food / Wine Value for money Attractions Business 7 7 6 6 5 5 4 4 3 2 17 20 27 53 110 0 40 80 120 Volume of Chinese Tourists (Thousands) Note: 1 The question regarding best experience was introduced in 2004, hence, the data has been presented for 2004 2008 Source: SAT Departure Survey, 2004 2008; Grail Research Analysis 57 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Province Visited Western Cape and Gauteng are the most widely visited South African provinces by leisure travellers from China, ~80% of travellers visit these provinces SA Provinces Visited by Chinese Leisure Travellers 1, 2003 2008 Combined Gauteng 77.3% Limpopo 1.6% North West 43.7% Mpumalanga 9.9% Northern Cape 2.0% Free State 1.8% KwaZulu Natal 10.8% Western Cape 78.3% Eastern Cape 7.8% Less than 10% 10% 30% 30% 70% Over 70% Note: 1 Includes travellers whose primary or secondary purpose of travelling is holiday Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 58 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Accommodation Type by Province A majority of Chinese leisure travellers to South Africa prefer to stay in paid accommodation, particularly in the North West and Mpumalanga provinces Percenta age of nights Geographic Spread of Chinese Leisure Travellers to SA by Accommodation Type, 2003 2008 Combined 100% 5% 3% 23% 18% 80% 38% 40% 36% 49% 60% 95% 97% 40% 77% 82% 62% 60% 64% 51% 20% 92% 0% Gauteng Western Cape Eastern Cape KwaZulu Natal Unpaid Accomodation Mpumalanga Limpopo Paid Accomodation 2 North West Northern Cape 8% Free State % of Total Nights (2003 2008) Total Nights Spent in Province, 2003 2008 Combined 33.5% 43.4% 2.9% 7.1% 4.2% 0.4% 5.8% 0.8% 2.0% Note: 1 Includes travellers whose primary or secondary purpose of travelling is holiday; 2 Paid accommodation includes all accommodation types except for staying with friends and family Source: SAT Departure Survey, 2003 2008; Grail Research Analysis 59 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Other African Countries Visited Zimbabwe, Botswana, and Zambia are the most widely visited other African countries by Chinese leisure travellers to South Africa Other African Countries Visited by Chinese Leisure Travellers to SA 1, 2003 2008 Combined Morocco Tunisia Western Sahara Algeria Libya Egypt, Arab Rep. 1.5% >4% Mauritania Mali Senegal Niger Chad Sudan Eritrea Gambia Burkina Faso Guinea-Bissau Guinea Nigeria Djibouti Benin Ghana 0.1% Sierra Leone Ethiopia Liberia Togo Cen. Afr. Rep. Cote Cameroon d'ivory Uganda Equat. Guinea Congo Dem. Rep. Kenya Gabon Congo Rwanda 13% 1.3% Percentage of Travellers 2% 4% 1% 2% Not mentioned / Score below 1% Angola 02% 0.2% Namibia 1.6% Burundi Tanzania Somalia Malawi Zambia 2.5% Mozambique Zimbabwe 1.1% Madagascar 4.2 % Botswana 2.6% Seychelles Mauritius Note: 1 Includes travellers whose primary or secondary purpose of travelling is holiday Source: SAT Departure Survey, 2003 2008; Grail Research Analysis South Africa Lesotho Swaziland 60 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Seasonality of Travel: China vs. All Markets Monthly fluctuation in Chinese arrivals to South Africa is higher, compared to arrivals from all markets combined Chinese and All Markets Arrivals Monthly Index, 2006 2008 centage of Arr rivals Per 14% 12% 10% 8% 6% 4% 2% China All Markets 2008 Beijing Olympics 0% J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2006 2007 2008 Annual Seasonality Index 1 China 1.50% 5.17% 12.05% All Markets 1.19% 1.11% 1.44% Source: 1 An index value of 0% represents perfect seasonality, i.e., the market is not characterized by large fluctuations from month-to-month. A value of 100% means that seasonality is very poor, i.e., the market is characterized by large fluctuations month-by-month Source: SAT, 2009; Grail Research Analysis 61 Copyright 2010 SA Tourism. Not to be reproduced without permission

Current Chinese Travellers to South Africa: Travel Behaviour Seasonality of Travel: Purpose of Visit 3.0 2.5 Seasonal Patterns of Chinese Travellers to SA by Purpose of Visit, 2006 2008 General Holiday Business Travellers Business Tourists 2.0 Visiting friends/relatives ndexed to arrivals thly 1 arrivals in erage monthly Mont ave 1.5 10 1.0 0.5 0.0-0.5-1.0-1.5 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2006 2007 2008 Note: 1 Month of taking the survey Source: SAT Departure Survey, 2006 2008; Grail Research Analysis 62 Copyright 2010 SA Tourism. Not to be reproduced without permission

Agenda Market Overview Travel Patterns Out of China Consumers Our Target Market Target Segments Channel Competitors Current Chinese Travellers to South Africa Demographics Travel Behaviour Potential ti Market and Their Perceptions 63 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Loyalty Segments The number of Chinese travellers to South Africa is small in contrast to the total outbound travellers from China. However, a combined likely segment of 33% indicates that they are likely to visit the country in future Loyalty Segments (based on all respondents), 2009 South Africa 13% 3% 20% 3%2% 60% The combined likely segments translate to 4,6M people (36% of 12.9M total market size) 0% 25% 50% 75% 100% Current & Likely Past & Likely Never, but Likely Current, but Unlikely Past, but Unlikely Never & Unlikely Current & Likely: Have visited for leisure in past 18 months (Q16b) and intend to visit for leisure in the future (Q14) Past & Likely: Have visited for leisure more than 18 months ago but less than 5 years ago (Q16b) and intend to visit for leisure in the future (Q14) Never, but Likely: Have not visited for leisure in the past 5 years (Q16b) and intend to visit for leisure in the future (Q14) Current, but Unlikely: Have visited for leisure in past 18 months (Q16b) and do not intend to visit for leisure in the future (Q14) Past, but Unlikely: Have visited for leisure more than 18 months ago but less than 5 years ago (Q16b) and do not intend to visit for leisure in the future (Q14) Never & Unlikely: Have not visited for leisure in the past 5 years (Q16b) and do not intend to visit for leisure in the future (Q14) Source: Brand Tracking Survey, November 2009 (n = 400) 64 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Total Awareness and Familiarity Total Awareness and Familiarity (based on all respondents) 100% Aided Awareness Unaided Awareness Top-of-Mind Awareness Percent Very Familiar With 75% 64% 60% 61% 66% 70% 50% 51% 48% 50% 52% 53% 25% 0% Percent very familiar with Based on all respondents 11% 10% 10% 2% 2% 1% 11% 13% 2% 4% Nov-07 Feb-08 Nov-08 Feb-09 Nov-09 10% (n=499) 11% 8% 7% 19% (n=429) (n=402) (n=403) (n=400) Source: Brand Tracking Survey, November 2009 Aided (Q9): Which of the following countries have you heard of as an international destination for leisure purposes prior to this survey? Unaided (Q7): I would like to begin by asking you about international destinations for leisure purposes. By this we mean foreign countries that you may consider visiting for leisure and enjoyment. When you think about international destinations for leisure purposes, which countries come to mind? Top-of-Mind (Q7): First mention to unaided awareness question. Percent Very Familiar with Each Country (Q11): Of all respondents, the percentages who are very familiar with each as an international destination for leisure purposes. 65 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Reasons for Visiting To experience a different culture To relax To see the scenery/beauty Warm climate Friendly people Engage in a variety of activities To go on safari My friends/family recommended it My travel agent recommended it To fulfill a dream Reasons for Visiting South Africa 1, 2009 49% 44% 38% 37% 32% 30% 27% 61% 59% 67% 0% 25% 50% 75% Reasons for Not Visiting South Africa 2, 2009 General issues of safety (health, weather, roads, crime, etc.) Concerns for my personal safety Uncertain about political climate/civil unrest Too much time to get there 22% No particular reason 22% Concern about AIDS 22% Don t know anyone there 22% Another destination was more appealing 19% Too expensive to get there 18% Too expensive once there 17% Other (please specify) 2% 45% 42% 38% 0% 25% 50% 75% Note: 1 Based on those who have visited South Africa for leisure in the past 5 years ((n=82); 21% of all respondents); 2 Based on those who have not visited South Africa in the past 5 years for either business or pleasure ((n=197); 49% of all respondents); Reasons for Visiting South Africa (Q35a): Why did you choose to visit South Africa as a destination for leisure purposes? (Select all that apply); Reasons for Not Visiting South Africa (Q34): Why haven t you visited South Africa for leisure purpose`s in the past 5 years? (Select all that apply) Source: Brand Tracking Survey, November 2006 66 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Encouraging First Time Visitors Special offers on safari, a chance to explore off the beaten path, and visit surrounding countries are the most important factors encouraging Chinese visitation to South Africa What Would Encourage First Time Visitors to Go to South Africa? (2009) 1 Special offer on safari That South Africa is going to host the 2010 Football World Cup Special offer on flights 36% 41% 41% Chance to explore "off the beaten path" Special offer on hotels Use South Africa as a base to visit surrounding countries 27% 25% 24% See friends/family 9% Nothing would make me want to return Other (please specify) 3% 2% 0% 10% 20% 30% 40% 50% 60% 70% Note: 1 Based on those who have not visited South Africa in the past 5 years and do not intend to in the future ((n=138); 35% of all respondents) Encourage Visitation (Q40): What, if anything, would encourage you to visit South Africa for leisure purposes in the future? (Select all that apply) Source: Brand Tracking Survey, November 2009 67 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Drivers of Attraction for Future Visitors Chinese travellers interest in a different culture and scenic beauty are the two key drivers for their future visits to South Africa Reasons for Interest in Leisure Visit to South Africa in the Future (based on those who have not visited South Africa in the past 5 years, but intend to in the future for leisure) Reasons for Interest in Leisure Visit to South Africa in the Future (n=79) To experience a different culture 58% To see the scenery/beauty 49% To relax 39% To fulfill a dream 35% To attend a scheduled sports event (e.g. 2010 Football World Cup) 23% Saw a special offer 19% Warm climate 18% To go on safari 16% Engage a variety of activities 15% To see the change since apartheid/see historic sites 15% My friends/family recommended it 15% Friendly people 14% To visit friends/relatives 10% Have been/will be traveling to South Africa for a business trip 10% My travel agent recommended it 9% Other (please specify) 1% Source: Brand Tracking Survey, November 2009 Based on those who have not visited South Africa in the past 5 years, but intend to in the future for leisure ((n=79); 20% of all respondents) Interest in South Africa (Q42): Why are you interested in visiting South Africa for leisure purposes in the future? (Select all that apply) 68 Copyright 2010 SA Tourism. Not to be reproduced without permission

Potential Market and Their Perceptions Reasons for Not Returning Safety-related concerns prevent some Chinese visitors from returning to South Africa Reasons for Not Returning to South Africa (based on those who visited South Africa for leisure in the past 5 years) Reasons for not Returning for Leisure (n=27) General issues of safety (health, weather, roads, crime, etc.) 41% Concern about AIDS 37% Did not feel safe 26% Concerns for my personal safety 26% Afraid of political climate/civil unrest 26% Would prefer to visit other places first 22% Too expensive once there 19% Too much time to get there 19% Not a relaxing destination 15% Too expensive to get there 15% Don t know anyone there 11% Prefer to visit another destination 11% It s boring 7% Unfriendly people 7% Nothing interesting to do there 0% Other (please specify) 0% Source: Brand Tracking Survey, November 2009 Warning some bases below 75 Based on those who have visited South Africa in the past 5 years for either business or leisure, but do not intend on returning for leisure ((n=27); 7% of all respondents) Not Returning (Q41): Why aren t you considering returning to South Africa for leisure purposes? (Select all that apply) 69 Copyright 2010 SA Tourism. Not to be reproduced without permission