Using economic modelling we determined the "mutliplier" effect of the tourism sector to the entire Queensland economy. Who would be suprirised that desipitre the recent hyped of coal and LNG investmment - tourism via it's spread of first level (i.e. the tourist's spend) spend is actually far greater than the three LNG projects of capital investment circa $160Billion on Curtis Island. We hope this will simply addvalue to the incredible bulk of evidence that already exists of the balue and thus the neeed to nuture Australia's tousim sector, especially when the $40Billion LNG plant investment announcement has so much more media appeal

1. Assisting Take Off
For Chinese Inbound Tourism To
Queensland
John Gregg
Principal, Navigate Consulting
Presentation to Jann Stuckey
Minster for Tourism, Queensland State Government
October 15th, 2012

2. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

3. Inbound Chinese tourism growth has averaged
13.4% p.a over the decade 2001-2011
Source – Tourism Research Australia, 2012

4. Drivers are varied but include;
• Week-long holidays stimulate outbound travel
– Three “golden weeks” each year – Labour Day (May), National Day (October) and Spring Festival
(late January/early February).
• Rapidly diversifying travel products and services
• Increasing number of flights and routes to and from China cities
• Increasing number of aviation ports
– 2004 – 7 international airports
– 2011 – 57 International airports with another 26 under construction
• State Council approved deregulation of travel agency/operator market to allow foreign entrants (2011 final
structure still being confirmed) to offer outbound tour services to Chinese tourists.
• Increased number of Chinese and Asian low cost carriers - AirAsia, JetStar, Tiger Airways, etc.
• Explosive growth of online ticket and hotel booking platforms such as Ctrip and Elong
• Appreciation of RMB to USD/AUS and Euro stimulates the willingness to travel
• Special promotions by ADS destinations to target Chinese travellers
• European and US key destinations are investing heavily in recruiting and training Mandarin speaking staff
(Australia sadly lags well beyond in this area)

5. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

6. Tourism is a cornerstone of the Queensland economy
• Contributes $17.7 billion to the Queensland economy and accounts for 7.1 percent of
Queensland’s Gross State Product (GSP).9
• Directly contributes $8.4 billion to the Queensland Economy.
• Indirectly contributes an additional $9.2 billion to the Queensland Economy.9
• Generates $3.8 billion annually as an export earner. 10
• Is the second largest export earner for Queensland, behind coal. 11
Notes & Sources
9 Tourism Research Australia, State Tourism Satellite Accounts 2009-10
10 International Visitor Survey, Tourism Research Australia, year to March 2012
11 Office of Economical and Statistical Research, year to June 2011

7. China and to a lesser extent India and South East Asia are the
bright lights in otherwise dark times for traditional EU, NA
and UK inbound markets
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Arrivals % chg - YE Jun 11 Visits to QLD (% chg) - YE Jun 11
Source - 2011, Tourism Research Australia, International Visitor Survey, YE June 2011

8. In recent years Chinese inbound growth in Queensland
has outstripped the rest of Australia
Visitors(‘000)
50
100
150
200
YE Jun 03 YE Jun 04 YE Jun 05 YEJun 06 YE Jun 07 YE Jun 08 YE Jun 09 YEJun 10 YE Jun 11
Total Leisure
Chinese visitors to Queensland
198,000
+ 25% on 2010
0
• 25% 2011 YOY growth was driven
by first time leisure travellers.
• 77% of Chinese visitors to Qld are on
holiday compared with 56% of
visitors to Australia overall
• Implying one of Qld’s competitive
assets is its’ perceptions as an
appealing, multi-faceted holiday
destination.
• Qld’s most popular destinations;
• Brisbane + 28% 2011/10
• Gold Coast + 10%
• Tropical NQ + 37%
Source - 2011, Tourism Research Australia, International Visitor Survey, YE June 2011
Key InsightsChinese Visitor Numbers

9. Chinese spend increased from $100M in 2006 to $381M June 2011.
In the same period, Queensland’s share of total Chinese spend in Australia
grew from 10% to 14%Expenditure($M,currentprices)
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Mar-11
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Jun-11
QLD'sMarketShare
99
110 115109
122131
150
166
200204203
213
239
252
269
287
326333 336338
388381
$50
$0
$300
$250
$200
$150
$100
$350
$400
$450
Year Ended
2%
0%
10%
8%
6%
4%
12%
14%
16%
Expenditure (LHS) QLD Market Share (RHS)
Source: Tourism Research Australia – International Visitor Survey

10. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

11. Chinese tourist spend in Queensland could more than double
within five years…..an ambitious target but with many challenges
Visitors
Average
length
ofstay
Spend
per
night
Total
Spend
($M)
Current (YEJ
2011)
198,000 17.8 $108 $381
2016-Low
Potential
378,500 12.6 $154 $732
2016-High
Potential
429,000 12.6 $154 $829
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
YE Jun 2011
$381
Potential High,
$829
Potential Low,
$732
$900
Expenditure Potential Low Potential High
Year Ended
$500
$400
$300
$200
$100
$0
$600
$700
$800
Would require over a 100%
increase in visitor numbers and
significantly higher daily spend
Source - 2011, Tourism Research Australia, Satellite Accounts and Vision 2020 Modelling

12. Other states, particularly Victoria and NSW have seen the
Chinese opportunity and are determined not to miss out
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
ChineseVisitors
New South Wales Victoria Queensland Other States
Chinese Visitors By State 2002 - 2012

13. To meet 2016 goals, per visitor spend must grow
significantly
Source - 2011, Tourism Research Australia, Satellite Accounts
Research must identify the rivers of this performance. Possible factors are many and might include a
reliance on the low yield package tour segments, a low share of the high value/spend “Affluent”
Nonetheless the issue needs to be addressed if Qld 2016 is to be achieved
Spend per Chinese visitor in Qld is lowest in the country
Expenditure per Visitor
Chinese
Spend per
Visitor
Int Visitor
Spend per
Visitor
% Chinese
Expenditure
Differential
SA $6,197 $2,023 206.3%
WA $6,763 $2,808 140.8%
ACT $4,280 $1,836 133.1%
Tas $3,672 $1,966 86.8%
NSW $3,939 $2,188 80.0%
Vic $3,308 $2,378 39.1%
Qld $1,796 $1,840 -2.4%
Total Australia $5,586 $3,236 72.6%
Resulting in Qld having a relatively low proportion of
Chinese spend versus other states
Total Expenditure
Chinese Visitors
Expenditure $M
Total Int Visitors
Expenditure $M
% Chinese
Expenditure
ACT $59 $284 20.8%
NSW $1,109 $6,279 17.7%
Vic $685 $3,941 17.4%
SA $106 $734 14.4%
Qld $381 $3,780 10.1%
Tas $26 $279 9.3%
WA $81 $1,938 4.2%
NT n/a $371 n/a
Australia $2,410 $17,607 13.7%

14. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

15. China remains the most promising tourism market in
the world
INDIA GLOBAL
2012 How consumers plan to
utilise spare cash
New Clothes
Holidays/ Vacation
Home Improvement
Consumer electronics
Out of home
entertainment
No spare cash
38%
34%
33%
32%
22%
7%
32%
32%
19%
22%
29%
16%
CHINA
52%
55%
37%
51%
19%
3%
Holidays/vacations tops the
list in
China: globally the
highest mention
2011, Nielsen, Understanding Growth Markets: China & India - Nielsen Outbound Travel Monitor, Sample Size N = 5,736

16. Eastern, Northern and Southern China continue to offer
the greatest outbound potential
Taiwa
n
Tianjin
Henan
Hainan
Shandong
LiaoningHebei
Shanxi
Anhui
Jiangsu
Zhejiang
Hubei
Shaanxi
Ningxia
Gansu
Inner MongoliaXinjiang
Tibet
Qinghai
Sichuan
Guizhou
Hunan Jiangxi
Fujian
GuangdongGuangxiYunnan
Heilongjiang
Jilin
Chongqing
BEIJING
Tianjin
Note: number of TAs represents the number of travel agency business entities, each with 1-50+ outlets
All GDP regional figures used are PPP
Sources – World Bank 2011, The Yearbook of China Tourism Statistics, 2011
Key Insights
 The 3 mega cities and their
surrounding catchment regions; rank
top three by outbound tourist
numbers and number of travel
agencies
 Shanghai & Yangtze River Delta
region
 Beijing & Central North & North
East
 Guangzhou & Pearl River Delta
region
 33,700 travel agency firms nation-
wide, with over 110,000 retail outlets
 Subtotal of North, Eastern and
Southern China:
•75% of all Travel Agencies
•82% of outbound bookings
North West
GDP PPP per capita:
US $6,622
# of Travel Agencies: 1,955
North East
GDP PPP per capita:
US$8,458
# of Travel Agencies 3,408
Central North
GDP PPP per capita: US$16,441
# of Travel Agencies:8,026
Central East
GDP PPP per capita:
US$17,354
# of Travel Agencies: 9,260
Central South
GDP PPP per capita:
US$12,986
# of Travel Agencies: 7,702
South west
GDP PPP per capita:
US$7,500
# of Travel Agencies: 3,310
Shanghai

17. Where to Focus: The Key regional markets
1. Yangtze River Delta
• 155 million residents
• 2011 per capita (GDP) $US17,354
• Largest city - Shanghai 22 million
people
• 16 cities with populations over 4
million in Shanghai municipality,
Zhejiang and Jiangsu provinces.
• Region accounts for 24% of China’s
GDP
The Yangtze River Delta

18. Key regional markets
2. Pearl River Delta
• Regional population 214 million
• 2011 regional GDP per capita $US13,000
• Key cities
• Shenzhen 10 million
• Guangzhou 11 million
• Dongguan 8 million
• Hong Kong 7 million
• China’s manufacturing hub
The Pearl River Delta

19. Key regional markets
3. Central North and North East
•Regional population 310 million
• GDP per capita $19,400 in Beijing –
ranging from $6,000 - $15,000 in
other regional centres
• Key cities
• Beijing 10 million
• Tianjin 12 million
• Shantou 12 million
• Shenyang 7 million
• Harbin 6 million
• Qingdao 5 million
Central North and North East

20. Future Opportunities Are To The West in Tier 2-4 Cities
Early market entrants will gain “first mover” advantage, the chance to capture dominant market
share and potentially reach an additional 2=310 million middle class consumers

21. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

22. Leisure Travellers are increasingly going beyond Hong
Kong & Macau
Hong Kong
Macau
France
Taiwan
Australia
Japan
Singapore
USA
Thailand
Germany
Top Destinations Leisure - 2011
(51)
(28)
(7)
(5)
(6)
(6)
(8)
(4)
(6)
(4)
NOTE:
Figures in (xx) indicate corresponding % from 2009 Nielsen round
2011, Nielsen, Understanding Growth Markets: China & India - Nielsen Outbound Travel Monitor, Sample Size N = 5,736

23. Package Tours still dominate but declined from 80% of
the market in 2004 to 41% in 2011
• 41% of overseas trips are group travel
– With difficulty in language barriers, most prefer to travel
in groups
– Group Tours more common for short haul Asian
destinations -Thailand, Malaysia, Taiwan, Korea
• Macro trends and government policies are driving the rise
in FIT leisure travel
– From Feb. 2005, Chinese citizens could apply for a private
passport with their ID card or Hukou
– Visa applications are relaxing -individual visas to HK，
Macao，Australia，New Zealand , US and most of
Southeast Asia countries are approved for Chinese
citizens
– Travelers, especially younger ones, prefer to gain
experience in overseas travel on their own
– Self organized “fully independent travel” FIT is rapidly
growing segment in Australia
Source – The Yearbook of China Tourism Statistics, 2011

24. Sightseeing, shopping and relaxation are key
drivers, VFR is not yet a prominent segment
Travel Motives (Leisure Segment)
2011, Nielsen, Understanding Growth Markets: China & India - Nielsen Outbound Travel Monitor, Sample Size N = 5,736

25. As a new generation of Chinese travellers emerge the key
travel motivation is shifting from sightseeing to relaxation
• Inexperienced travelers tend to pack their
schedules with sightseeing activities in order
to get the most value (as they perceive it) for
their money.
• Experienced travelers are more willing to
spend time and money on activities such as
entertainment, shopping and increasingly
experiences—an inclination that also
influences their choice of destinations.
Source – Tourism Australia Visitor Departure Surveys, The Yearbook of China Tourism Statistics, 2011
200
0
800
600
400
Millions of trips
1,000
2020
Relaxation
882
473
409
2010
Sightseeing
274
164
110
CAGR
2010 –2020
(%)
10
16
By 2020,Travel for Relaxation Will Become
More Popular Than Sightseeing
Primary reason for leisure travel
Sources: National Bureau of Statistics of China;, Navigate Analysis

26. CHINA
GLOBAL
(Australia, NZ, US, UK, France,
Canada, Japan, Germany, Spain, Italy
Holidays/ Vacations
an avenue to cope
China highest mentions on work/life balance among all countries in Nielsen sample.
Average hours worked per annum in China are 2350 (over a 6 day week; in not all but many SOEs) versus;
• Australia 2156 hrs per annum
• US 1950
• Greece 1305
Source- 2011, OECD-The World At Work
Add to this the competition fostered by the one child policy, where the weight of expectations of all family members
(“the circle of six” – mum, dad and both sets of grandparents) fall on one set of shoulders. Young Chinese are face a
“high stress”and “extreme” achievement based culture.
With rising affluence comes a desire for a better quality of life. Hence Chinese less likely to cut down holidays/
vacations to save on expenses than other nationalities
The increasingly hectic and competitive pace of life in
China is driving this shift in motivation
Biggest concern over the next 6 months
Source – July 2011, Nielsen Global Travel Motivations and Intentions Monitor
• Work/Life Balance
• Health
• Increasing cost of living
• Increasing cost of living
• Economy
• Work/Life Balance

27. Multiple outbound segments are evolving, with
experienced, affluent travelers increasingly important
Inexperienced
travelers
• Travel is for sightseeing—
the more the better
• Traveling around the world
is a lifetime dream
• 56%
• 33%
• Packed schedules of must-
see sites
• Historicalsites and museums
• Travel agencies for packaged
tours and booking assistance
• Word of mouth, TV, and
websites
Experienced mass
-
market travelers
• Travel is to explore cities
outside nearby regions
• Outbound travel is an
indication of status and
special occasions
• Sightseeingand relaxing
entertainment
• Fewer packagedtours and
more independentlyplanned
trips
• Online search and booking
Experienced
affluent travelers
• Travel is good for relaxation
and stress relief
• Prefer to return to places
that o? er relaxing activities
and a slower pace of life
• Entertainment, shopping,
and luxury accommodations
rather than overscheduled
sightseeing
• Websitesare the main
• channel for travel planning
• Premium theme-based tour
packagesfor outbound trips
Attitudes and
aspirations
Trip activities
Trip planning
Share of total travel spending1
• 23%
• 26%
• 21%
• 41%
2010
2020
Sources:NielsenConsumerTravel Survey, July2010;
Note:Inexperiencedtravelersas those with fewer than three years of travel experiencewho have taken fewer than three trips in the past 12
months.Experiencedmass-marketand affluenttravelershave made more than three trips in the past 12 months. 1

28. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming partnerships with Chinese wholesalers-identifying key players, importance of ‘reciprocity” & “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

29. Securing new Airlines and routes – the bedrock that
determines all other outcomes
1. Supporting new routes and existing airlines to grow profitable capacity
A. State government has a critical role to play;
i. From market audits and feasibility studies all the way through to the launch of new
routes/airlines (e.g. specific tasks include forecasting traffic requirements; short, medium
and long term, prospect identification, negotiations leadership, MOU development, cost-
benefit analysis of identified prospects/proposals)
ii. Current key China-Qld routes are;
• Via Guangzhou, Beijing and Shanghai with China Southern into Brisbane
• Via Hong Kong with both Cathay Pacific and Qantas into Brisbane
• Via Hong Kong with Cathay Pacific into Cairns

30. Securing new Airlines and routes – the bedrock that
determines all other outcomes
1. Supporting new routes and existing airlines to grow profitable capacity (Continued)
A. Serious efforts need to be made to secure charter flights in the three Chinese peaks seasons.
I. Current scheduled routes/flights cannot meet the peak demand of Chinese New Year (CNY) in February , July
and November. Significant visitor numbers are being lost.
II. Charters need to be ramped up to meet peak demand periods
III. Charters also allow airlines to “test market” a destination with little risk
IV. Achieving the above requires close negotiations with wholesalers; the “Big Five” the largest and most
important of which are listed below
• China International Travel Services (CITS),
• China Travel Service (CTS),
• China CYTS Tours,
• C-Trip Shanghai and;
• Shanghai Jianjiang.
• Together these wholesalers book and sell package tours and ancillary services to 139,000 of the 543,000
(or 25%) total Chinese visitors to Australian in 2011.1
• A Failure to recognise the sheer size and also the political influence of the “Big Five” is the most common
denominator underpinning failure of those Western travel firms that eventually withdraw from the
Chinese market.
Source: Navigate China Tourism, Travel and Hospitality Project Experience

31. The current travel industry in China is characterized by
fragmentation, Intense competition and the rapid
growth of online channels
• The travel agency market remains fragmented – but consolidation rapidly increased in the years
2006-2011
• Three operators CTS, CITS and CYTS control 50% of the market and for Tourism Authorities like TQ
it is critical to engage, negotiate and collaborate with the Big Three to have any chance of
securing significant exposure and promotional support.
• E-travel players are well established and dominated by 2 players - Ctrip and eLong.
• Agency commission is 10-20% of the retail price, depending on the product and the distribution
level (1st or 2nd tier)
• Discount, performance-based commission and year-end bonus are common practice among
agencies and travel product/service providers
• Most products are sold through traditional travel agencies
• Intense competition (32,000 agency firms nation-wide) leads to discounting wars and heavy
promotional activities
Structure
Economics

32. CTS, CITS and CYTS are the leading players
CTS CITS CYTS
Established in 1949, CTS is the first
travel agency in China, and was
under the control of Overseas
Chinese Affairs Office, a
government body
Now CTS Head Office in Beijing is
the original one carrying the legacy
of the first agency established in
1949
There are ~7,200 other travel
agencies under CTS brand name
via loose franchise across the
country
In 1954, CITS was set up as a
department under the State
Council to handle international
liaison affairs
Now CITS Head Office in Beijing is
the largest member within CITS
family with more than 20 branches
and subsidiaries
There are another 4550+ travel
agencies under CITS brand name
via loose franchise across the
country
Largest and first-licensed
international travel agency with
branches and member agencies in
522 domestic cities and 49
overseas locations
Striving to become the largest
integrated tour operator in China
CYTS family was set up by
local youth league separately
back in 1970’s
CYTS public listed on
Shanghai Stock Exchange in
1997
More than 5000 travel
agencies under CYTS brand
name nationwide form the
loosest family structure among
the top 3
Source: Company websites,

33. The most successful online companies have been Ctrip
and eLong
Key Findings
 Ctrip is by far the largest online
travel service provider in China
– Public-listed on NASDAQ
(CTRP) since December 2003
– 2010 revenue: US $ 740.3M
(42.8% growth compared to
2009)
 eLong ranks second
– Public-listed on NASDAQ
(LONG) since October 2004
– 2010 revenue US$616.7
million (86% growth compared
to 2008)
60.9%
35.7%
8.7%
8.1%
7.0%
5.6%
3.2%
0% 10% 20% 30% 40% 50% 60% 70%
Ctrip
eLong
piao.com
piao.com.cn
Sina.com
163travel.com
TomTravel
Note: Traffic indicator (%) represents percentage of survey respondents who has experience booking on particular website, N=832
Source: iResearch,
Traffic of Online Lodging or Ticketing Websites
Traffic
indicator

34. High performing players are more locally focused...
• Local online players
– Market leaders such as Ctrip and eLong are exclusively focused on the Chinese market only
– They have very much developed their offerings and infrastructure to suit the local market, e.g.
• Large call center to handle many offline inquiries
• Physical delivery of air tickets in major cities
• Regional or International Online players
– very small presence and rely mostly on online channel
– Tends to serve foreign customers traveling to China only
• International hybrids
– Zuji is a consortium of Asian airlines – rapid SOM expansion 2005-2009
• Difficult to get multiple partners to work together
• Limited Chinese market product offering so far
– Priceline – subsidiary of Hutchison
• Not huge volume since suppliers have not tuned their inventory management to a level
where such a specialized player is needed

35. Building presence in the trade – Golden rules
• Execute cooperative campaigns with strong consumer direct element.
• Lobby and promote Qld presence in Chinese group itineraries
• Group travel focus, but retain some budget for fast growing FIT segment
• Agent education by training, road-shows and travel exchange.
• Familiarisation trips for key agents including ATE & PAS famil.
• Feature key regions of Brisbane, Gold Coast (and Sunshine Coast), Far-North
Qld
Source: Navigate China Tourism, Travel and Hospitality Project Experience

36. Agenda
1. China – Australia’s success story
– 10 year growth rates
2. Queensland a high performer with an ambitious five year goal
– Economic impact of Chinese inbound tourism
– Arrivals and expenditure growth and trends
3. China 2016 goals, challenges and opportunities
– Other states want their share of the Chinese action
– TQ must address some key targeting and yield challenges
4. Understanding the Chinese outbound market – heterogeneity is the norm
– The big three – Yangtze River Delta, Pearl River Delta and North and North East
– Tourism Queensland’s priority cities
– Emerging and future frontiers – the next 1000+ cities
5. The Chinese traveller – then, now and the future
– The rise of the Fully Independent Chinese Traveller (FIT)
– Moving from,“ticking off” attractions; shifting to a desire for true relaxation
– Understanding and marketing to discrete Chinese tourist segments
6. Industry and Distribution Analysis
– China Travel Distribution Baseline
– Media / Communication Channels
– Forming parerships with Chinese wholesalers-identifying the key players, importance of ‘reciprocity” and “Guanxi”
7. Attracting Chinese FDI to Australia’s tourism sector
– Current status and existing and future tourism investment prospects
– Throw out much of what you’ve learnt, this time it’s different
– Leveraging Austrade’s expertise and resources

37. Chinese investment in Australia
Year Chinese investment
Chinese investment
including Hong Kong
2006 A$3.5 billion (A$42.4 billion)
2007 A$6.2 billion (A$52.4 billion)
2008 A$8.5 billion (A$64.5 billion)
2009 A$16.6 billion (A$59.8 billion)
2010 A$19.5 billion (A$60.3 billion)
Source – 2011, The Australian Trade Commission

38. Existing Projects:
• Fullshare:
• Laguna Whitsundays Airport , QLD
• Laguna Whitsundays Golf Course, QLD
• Laguna Village, QLD
• Laguna Whitsundays 5-star hotel, QLD
• Xian Hongfeng: Eco tourism resort, SA
• China Coke(Rockland): Leonda function center , WA
• China Southern: Flight training center, WA
• Lushida Enterprise Group: New China Town, VIC
Potential investors:
• Hainan Airlines : Hotels, airport ,etc.
• Shanghai Airlines : Direct CH-Aus routes
• Huaqiang: Theme parks
Existing and near future tourism investment
projects

39. • Different business cultures and integration issues (Guanxi critcal – deal maker/breaker)
• (Still) limited Chinese understanding of market economy dynamics
• Lack of “Australian” standard due diligence
• Lack of experience in investing in developed economies
• Inadequate understanding of legal / other risks
• Chinese Government’s lengthy approval process
• Lack of international management talent
China needs considerable foreign advice – but “Mianmu” 面目, the Chinese concept of “face” makes
it culturally difficult to accept that they need it
China’s main concerns: Australia’s high cost base, government approval process, labour & strong A$
In seeking Chinese FDI, Throw out much of
what you’ve learnt in Australia
Source: Navigate China Tourism, Travel and Hospitality Project Experience

40. What can be done?
Leveraging Austrade’s expertise and resources
• Collaborate on opportunities,
research, targets and partnership
with Austrade
• Develop marketing collateral for
Austrade Business capability
document
• Videos/PowerPoint decks for local
agency and wholesaler clusters
• Develop an investment facilitation
network
• With Austrade, develop an
investment conferences
programme
• Consider new investment
marketing support
• Quick wins - look at product
bundling opportunities
Austrade has 13 Full Service Offices In China
Source: Navigate China Tourism, Travel and Hospitality Project Experience

41. Thank you
Feel free to contact me at:
johng@navigateconsulting.com.au
Mobile: (+61) 0402 493 278