Prof. Dr. Wolfgang Georg Arlt Director COTRI Influencing Luxury Shopping Behavior of Chinese Outbound Travelers to California

COTRI China Outbound Tourism Research Institute is the worldwide leading independent research institute for analysis, consulting and quality assessment relating to the Chinese Outbound Tourism market. Headquarter in Heide/Germany, China office in Beijing. Director: Prof. Dr. Wolfgang Georg Arlt FRGS Active in P.R. of China since 1978 Former owner of Inbound Tour Operator China->Europe COTRI founder and director since 2004 Professor at West Coast University of Applied Sciences Exhibitors Workshop April 12, 2011

Consulting Services to Richemont North America, Inc. Purpose COTRI to assist with evaluation and research projects regarding the luxury shopping behavior of Chinese outbound travelers to California Research tools For the research two sets of research tools were develop and pre-tested in Los Angeles and San Francisco. 1) Half-open questionnaires as base for interviews with Mainland Chinese Travelers visiting California about their shopping sources of information, preferences, expectations and actual shopping behavior. 2) Conversation guide as base for interviews with Chinese living in California about their experiences of shopping behavior of Mainland Chinese visitors. Results The results will be presented to Richemont as a trend indication and also used to further calibrate the research tools for a possible boarder survey

Global Tourism 2010: 6.7% increase of international tourism arrivals Asia –Pacific region 20% increase year by year Forecast for global tourism: From 930 million to 1.6 billion travels by 2020

China´s Major Targets of the 12th Five-Year Plan for 2011-2015 Annual average GDP growth: 7% GDP in 2015 (based on 2010 prices): 55 trillion Yuan (US$ 8.37 trillion) Proportion of service industry's output in GDP: up by 4 percentage points Release of major pollutants: down by 8%-10% Jobs created: 45 million Average growth of residents´ income: more than 7%

2010: 57. 4 million outbound trips China is the No 2010: 57.4 million outbound trips China is the No. 1 source market in Asia even without taking into account trips to Hong Kong / Macao For the second time in China: Outbound tourism spending higher than inbound tourism income

2000: Global market share 1. 5% 2010: Global market share 5 2000: Global market share 1.5% 2010: Global market share 5.8% 2000: One out of 67 international travellers originates in Mainland China 2010: One out of 16 international travellers originates in Mainland China

Share of Chinese outbound travels during three quinquenniums 1995-2009 (Source: CNTA / COTRI, no reliable data available before 1995) More than 60% of all travels happening in last quinquennium 2005-2009

Chinese outbound travels projection for current quinquennium 2010-2014 a) projected increase according to State Council planning b) projected increase if growth rate equals 2000-04/2005-09

Visitors from China to USA 99 – 2009 Destination: USA Visitors from China to USA 99 – 2009 ADS agreement between USA and China officially started in 2008. Mainland Chinese tourists arrivals in 2010: 730,000 (NTA, up to Aug 2010) Over 2 million expected by 2015 (NTA) Source: USA Department of homeland security, Form I-94, Non-Resident Arrival Records

Temporarily home for more than 20,000 students Most important destinations: California, New York, Washington DC.

How do Chinese citizens view the United States? Words that commonly describe USA: dominant, successful and expensive. On the other side, unfamiliar and unsafe. Motivations: seeing something new and different, learning and discovering, and experiencing a different culture. Overall impression of the US (10 being the most positive): 7.68 Source: University of South Carolina, Research 2010

Destination: California China: Seventh largest overseas market, 271,000 visitors in 2009, 51.6% of total visits to USA. Average stay 16.9 nights, spend by visit US$ 1,606 per visitor. Chinese visitors spend US$ 435 million in California

Activities while in the USA, 2009 Most common Metropolitan Statistical Areas visited by Chinese visitors to California, 2009 Activities while in the USA, 2009 Los Angeles (48%) San Francisco (42%), Hollywood /Melrose (33%) Santa Monica (17%), San Diego (12%) Monterey/Carmel (11%).

While visiting California: More likely Be on their first trip to the USA Visit casinos and go shopping Travel for business purposes Work in a managerial/ executive position Spend a higher percentage on gifts and souvenirs and transportation Less likely Travel with spouse. Visit small towns, national parks or tour the countryside. Source: California Travel and Tourism Commission 2009

Market Segments Segmentation of market in - low price/bad quality mass market For the “Europe-from-the-Coach-Window” mass market there is still a queue of at least 100 million Chinese waiting for their turn to get their photo in front of the Eiffel tower. and - “FIT” / “Semi-FIT”, ”MICE”, high-end market "We didn't want to go on a group tour since these can be very rushed, taking in too many countries over a short period of time. We think we handle independent travel quite well since we were all in Singapore last Spring Festival when we also went to Thailand. We think we will be able to get around Italy by ourselves.” (China Daily 28- 01-2011)

March 2011: 457 million internet users in China 34% internet penetration rate.

Chinese luxury consumption worldwide 18% growth annually from 2010 – 2015 20% From the total global luxury market.

Source: Market Probe Travel and Tourism Luxury Market Chinese millionaires 960,000 (Hurun Wealth Report 2011) 30% women Average age: 39 years old, 15 years younger than Western Chinese Luxury Tourists (CLT) 96% first/business air travel, 99% stay in four or five star hotels Last minute holiday makers, no seasonality, looking for safe, stable and healthy destinations with good shopping. Source: Market Probe Travel and Tourism Group, 2011

China Outbound Tourism 2011 Good news – not only because of quantitative growth but also because of qualitative developments: Political support for outbound tourism Greater interest in in-depth travels Easy access to passports and hard currency

1. Political support for outbound tourism by Chinese Central Government: On November 25th 2009, a State Council executive meeting chaired by Chinese Premier Wen Jiabao adopted the “Statement on Accelerating the Tourism Industry Development” which declared a planned annual increase of 9% for outbound tourism. In the 12th Five-Year Plan for the first time the development of outbound tourism is actively promoted instead of being hindered by the Chinese government.

2. Greater interest in in-depth travels: “… one of the remarkable characteristics of China tourism in 2010 was the detailed market segmentation. When the normal tourism market was still the main component of tourism section, special interest groups were forming as well. Some special attractive long-distance and niche market focused tourism products which were offered by tour operators both inside and outside China turned out to be very successful.” Prof. Zhang Guangrui Development of China's Outbound Tourism 2010 in: Green Book of China's Tourism 2011 Niche market and special interest products offer opportunities to attract Chinese visitors

3. Less bureaucratic problems from the Chinese side: 140 ADS agreements with all important destinations signed Access to passports and hard currency relatively easy Individual tourist visa agreements with Asian and some European countries More choice of destinations and tours than ever

But complaints about many destinations: Visa problems still existing (Perceived) Safety problems given extensive media attention in China Quality level often not according to Chinese expectations Not enough visible dedication to Chinese market

Thanks - www.china-outbound.com and - www.chinatraveltrends.com